Cellect Biotechnology Ltd. Annual Report 2017

Plain-text annual report

20F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.3620F 1 f20f2017_cellectbiotech.htm FORM 20FUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 20FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017Commission File No.: 00137846CELLECT BIOTECHNOLOGY LTD.(Exact name of registrant as specified in its charter)Translation of registrant’s name into English: Not applicableState of Israel23 Hata’as StreetKfar Saba, Israel 44425(+972) (9) 974 1444 (Jurisdiction of incorporation or organization) (Address of principal executive offices)Dr. Shai YarkoniChief Executive Officer(+972) (9) 974 1444Shai@cellectbio.com23 Hata’as StreetKfar Saba, Israel 44425(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class to be registeredName of each exchange on which each class is to beregisteredAmerican Depositary Shares, each representing twenty (20) Ordinary Shares, nopar value per shareThe Nasdaq Stock Market LLCWarrants to purchase American Depositary SharesThe Nasdaq Stock Market LLCOrdinary Shares, no par value per share*N/A* Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to requirements of the Securities and ExchangeCommission.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneNumber of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017: 120,140,659 ordinary shares.Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct of 1934.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months.Yes ¨ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or an emerging growth company.Large accelerated filer ¨Accelerated filer ¨Nonaccelerated filer xEmerging Growth Company xIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.U.S. GAAP ¨International Financial Reporting Standards as issued by the International Accounting Standards Board xOther ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨ Item 17 ¨ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company.Yes ☐ No ☒TABLE OF CONTENTSPageINTRODUCTIONCAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE1ITEM 3.KEY INFORMATION1A.Selected Financial Data1B.Capitalization and Indebtedness2C.Reasons for the Offer and Use of Proceeds2D.Risk Factors2ITEM 4.INFORMATION ON THE COMPANY25A.History and Development of the Company25B.Business Overview26C.Organizational Structure58D.Property, Plants and Equipment58ITEM 4A.UNRESOLVED STAFF COMMENTS58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS59A.Operating Results59B.Liquidity and Capital Resources64C.Research and Development, Patents and Licenses66D.Trend Information66E.OffBalance Sheet Arrangements67F.Tabular Disclosure of Contractual Obligations67ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES67A.Directors and Senior Management67B.Compensation71C.Board Practices74D.Employees87E.Share Ownership87ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS88A.Major Shareholders88B.Related Party Transactions90C.Interests of Experts and Counsel90ITEM 8.FINANCIAL INFORMATION90A.Consolidated Statements and Other Financial Information90B.Significant Changes92ITEM 9.THE OFFER AND LISTING92A.Offer and Listing Details92B.Plan of Distribution92C.Markets92D.Selling Shareholders92E.Dilution92F.Expenses of the Issue92iITEM 10.ADDITIONAL INFORMATION92A.Share Capital92B.Articles of Association92C.Material Contracts98D.Exchange Controls99E.Taxation99F.Dividends and Paying Agents107G.Statement by Experts107H.Documents on Display107I.Subsidiary Information108ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK108ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES109A.Debt Securities109B.Warrants and rights109C.Other Securities109D.American Depositary Shares109PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES110ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS110ITEM 15.CONTROLS AND PROCEDURES111ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT112ITEM 16B.CODE OF ETHICS112ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES112ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES113ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS113ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT113ITEM 16G.CORPORATE GOVERNANCE113ITEM 16H.MINE SAFETY DISCLOSURE115PART IIIITEM 17.FINANCIAL STATEMENTS115ITEM 18.FINANCIAL STATEMENTS115ITEM 19.EXHIBITS115SIGNATURES118iiINTRODUCTIONWe are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.On July 29, 2016, our American Depositary Shares, or ADSs, each representing twenty of our ordinary shares, and our listed warrants, commenced tradingon The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel AvivStock Exchange.Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biotechnology Ltd.and its whollyowned subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital” refer to the ordinary shares, ADSs, warrants and sharecapital, respectively, of Cellect.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to“ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial Reporting Standards, or IFRS, as issued bythe International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles inthe United States.Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended on December 31, 2017are translated using the rate of NIS 3.467 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2017; U.S. dollar translations of NIS amountspresented in this annual report on Form 20F for the year ended on December 31, 2016 are translated using the rate of NIS 3.845 to $1.00, the exchange rate reportedby the Bank of Israel on December 31, 2016; and U.S. dollar translations of NIS amounts presented in this annual report on Form 20F for the year ended onDecember 31, 2015 are translated using the rate of NIS 3.902 to $1.00, the exchange rate reported by the Bank of Israel on December 31, 2015.CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTSCertain information included or incorporated by reference in this annual report on Form 20F may be deemed to be “forwardlooking statements” within themeaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forwardlooking statements are often characterized by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are notthe only way these statements are identified.These forwardlooking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that containprojections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion anduse of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project,believe or anticipate will or may occur in the future.Forwardlooking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forwardlookingstatements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.iiiImportant factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forwardlookingstatements include, among other things:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●our ability to continue as a going concern;●uncertainties of cash flows and inability to meet working capital needs;●our ability to obtain regulatory approvals;●our ability to obtain favorable preclinical and clinical trial results;●our technology may not be validated and our methods may not be accepted by the scientific community;●difficulties enrolling patients in our clinical trials;●the ability to timely source adequate supply of FasL;●risks resulting from unforeseen side effects;●our ability to establish and maintain strategic partnerships and other corporate collaborations;●the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business withoutinfringing the intellectual property rights of others;●competitive companies, technologies and our industry;●unforeseen scientific difficulties may develop with our technology;●our ability to retain or attract key employees whose knowledge is essential to the development of our products.; and●those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating andFinancial Review and Prospects”, as well as in this annual report on Form 20F generally.Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20F which are designed to adviseinterested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.You should not put undue reliance on any forwardlooking statements. Any forwardlooking statements in this annual report on Form 20F are made as ofthe date hereof, and we undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future eventsor otherwise, except as required by law.In addition, the section of this annual report on Form 20F entitled “Item 4. Information on the Company” contains information obtained from independentindustry sources and other sources that we have not independently verified.ivPART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements andnotes thereto. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2015, 2016 and 2017, and the selectedconsolidated balance sheet data at December 31, 2016, and 2017, have been derived from our audited consolidated financial statements and notes thereto set forthelsewhere in this annual report on Form 20F. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2013 and 2014, andthe selected consolidated balance sheet data as of December 31, 2013, 2014 and 2015, have been derived from our audited consolidated financial statements notincluded in this annual report on Form 20F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualifiedentirely by reference to such consolidated financial statements.Consolidated Statements of Comprehensive Loss DataConveniencetranslationYear endedDecember 31,Year endedDecember 31,201320142015201620172017N I S In thousands except shares and share dataU.S. dollars inthousands (2)Research and development expenses, net1,0623,0585,8938,25611,5033,318General and administrative expenses2,4252,4914,2047,96812,9303,729Other Income(280)Total operating expenses3,4875,54910,09715,94424,4337,047Operating loss3,4875,54910,09715,94424,4337,047Financial income(11)(37)(4)(660)(101)(29)Financial expenses2023979333,8921,123Net loss3,6785,55110,17215,31728,2248,141Total Comprehensive loss3,6785,55110,17215,31728,2248,141Loss per shareBasic and diluted loss per share (1)0.0750.0840.1370.1680.2520.073Basic and diluted loss per ADS1.501.682.743.365.041.46Weighted average number of sharesoutstanding used to compute basic anddiluted loss per share49,152,88665,968,76874,475,10991,128,516111,968,663111,968,6631Consolidated Balance Sheet DataConveniencetranslation(2)December 31,December 31,201320142015201620172017N I S In thousandsU.S. dollars inthousandsCash and cash equivalents4,0442,1223,9136,27913,7343,961Short term deposits19,660Marketable securities11,2577,8294,99713,9994,038Other receivables1881614121,461818236Restricted cash20202014030588Other Long term receivables7717350Property, plant and equipment292341,1871,3731,344388Total assets4,35813,79413,36133,91030,3738,761Trade payable1074661,4011,703491Other payables7282,3942,0842,396691Warrants to ADS1,9387,4222,141Total liabilities6008352,8605,42311,5213,323Loan from controlling shareholder515Total shareholders’ equity3,24312,95910,50128,48718,8525,438(1)Data on diluted loss per share were not presented separately in the financial statements because the effect of the exercise of the options and warrants isantidilutive.(2)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar to NIS 3.467.The following table sets forth information regarding the exchange rates of NIS per U.S. dollar for the periods indicated. Average rates are calculated byusing the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.NIS per U.S. dollarsAnnualHighLowAveragePeriod End20173.8603.4673.6003.46720163.9833.7463.8413.84520154.0533.7613.8843.90220143.9943.4023.5773.88920133.7913.4713.6093.471MonthlyMarch 2018 (through March 12, 2018)3.4693.4403.4573.440February 20183.5353.4273.4943.485January 20183.4603.3883.4233.405December 20173.5503.4673.5033.467November 20173.5443.4993.5173.499October 20173.5423.4913.5123.521September 20173.5843.5043.5373.529On March 12, 2018, the daily representative rate was $1.00 to NIS 3.440, as reported by the Bank of Israel.B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsYou should carefully consider the risks described below, together with all of the other information in this annual report on Form 20F. The risks describedbelow are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materiallyand adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSscould decline.2Risks Related to Our Financial Position and Capital RequirementsWe are an early stage company with a limited operating history.Our whollyowned subsidiary commenced operations developing our functional stem cell selection ApoGraft technology in 2011. As such, we have alimited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operatinghistory. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must beconsidered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. Ifwe fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated withdeveloping and commercializing our ApoGraft technology platform, we are unable to predict the extent of any future losses or when we will become profitable, ifever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully considerthe substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, celltherapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize ApoGraft , and our business may fail.We have a history of losses and can provide no assurance of our future operating results.Since 2011, we have been focused on research and development activities with a view to developing our ApoGraft technology platform. We have financedour operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE and also on the NASDAQ) and haveincurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 28.2 million ($8.1million) in 2017, NIS 15.3 million ($4.0 million) in 2016, and NIS 10.2 million ($2.6 million) in 2015. As of December 31, 2017, we had an accumulated deficit ofapproximately NIS 63.9 million ($18.4 million). We do not know whether or when we will become profitable. To date, we have not commercialized our technology orgenerated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred indevelopment and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the yearended December 31, 2017 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue toincur losses for the foreseeable future, and these losses will likely increase as we:●initiate and manage preclinical development and clinical trials for our ApoGraft technology platform and ApoTainer kits;●implement internal systems and infrastructures;●seek to license additional technologies to develop;●hire management and other personnel; and●move towards commercialization.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit,reduce or terminate our product development or commercialization efforts.As of December 31, 2017, we had approximately NIS 27.7 million ($8.0 million) in cash and cash equivalents including marketable securities, a workingcapital of NIS 24.5 million ($7.1 million) and an accumulated deficit of NIS 63.9 million ($18.4 million). As of December 31, 2017, we had sufficient cash and cashdeposits to fund operations through the end of the first quarter of 2019. Since our inception, most of our resources have been dedicated to the development ofApoGraft. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable futuredeveloping our ApoGraft technology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated withresearch and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additionalmanagement and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incuradditional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highlyuncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGrafttechnology platform, our ApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and otherfactors currently unknown to us, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategicpartnerships and alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerationseven if we believe we have sufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitiveposition, quality compliance and financial condition.3Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances andlicensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existingshareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price ofour shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such asincurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensingarrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable tous. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.4Risks Related to Product Development and Regulatory ApprovalOur product development program is based on a novel functional stem cell selection technology platform and is inherently risky.We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our ApoGraft technologyplatform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, thirdparty reimbursement, andmarket acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. Thesechallenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.Our ApoGraft technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitableproducts.We are concentrating our efforts on developing our first line of products, our ApoTainer collection kits, which is based on our ApoGraft technologyplatform, to improve the safety and efficacy of allogeneic HSCT. To date, we have only begun to conduct clinical trials. As such, we have yet to develop anyproducts that have been approved for marketing, and our future success depends on the successful proof of concept of the ApoGraft technology platform anddevelopment of our ApoTainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to ourtechnology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical trials or commercializing the ApoGraft technology platform and our ApoTainer selection kits on a timely or profitable basis, if at all. OurApoTainer selection kits are not expected to be commercially available for several years, if at all.If the FDA classifies our ApoTainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for DrugEvaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market ourApoTainer selection kits or other products based on our ApoGraft technology platform in a timely manner or at all. Even if we do obtain approval, the cost anddelay could materially adversely affect our financial condition, results of operations and cash flows.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of Center for BiologicsEvaluation and Research, or CBER. The classification of our ApoTainer selection kits by the FDA as a drug, a medical device or a combination product dependsupon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. Based oninformal discussions with the FDA concerning our regulatory plans, we believe the FDA will classify our ApoTainer selection kits as a combination product subjectto the primary jurisdiction of the CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be more burdensome and lengthy than if ourApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the Center for Devices and Radiological Health. The cost anddelay in the approval process could materially adversely affect our financial condition and results of operations and cash flows.Future results released from our ongoing openlabel Phase I/II clinical trial may differ materially from interim or preclinicaltrialresults.Clinical trials are inherently risky and may reveal that our ApoGraft platform technology is ineffective or has unanticipated interactions that maysignificantly decrease trial success. Our preclinical trial results and our interim results of our ongoing Phase I/II clinical trial of ApoGraft or any other interim resultsmay differ materially from final results and do not necessarily predict favorable final results.5We may face numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent commercialization of our ApoGraft platformtechnology and ApoTainer selection kits or any future product. These clinical trials could be affected by negative or inconclusive trial results, unexpected delays,unanticipated patient dropout rates or adverse side effects and future actions by regulatory authorities or additional expenses.Clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for our ApoTainer selection kits or anyfuture products are expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays orfailures in any necessary clinical trials could prevent us from commercializing our ApoGraft technology platform and ApoTainer selection kits or any futureproduct and could adversely affect our business, operating results and prospects.Initiating and completing clinical trials necessary to demonstrate proof of concept of the ApoGraft technology platform and support approval for ourApoTainer selection kits or any future products that we may develop, or additional safety and efficacy data that the FDA may require for any new specificindications of our technology that we may seek, are time consuming and expensive with an uncertain outcome.Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify andrecruit. To date, we have experienced delays in our ongoing Phase I/II clinical study largely related to slower than expected recruitment. Patient enrollment in clinicaltrials and completion of patient participation and followup depends on many factors, including the size of the patient population, the nature of the trial protocol, theattractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigatorsand support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, andpatient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive posttreatment procedures or followup to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trialprotocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial orsuffer adverse medical events unrelated to our product candidates.Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop suchprotocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/orfor a longer followup period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure ofpatients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our productcandidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results andprospects.The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trialsmay result in the discovery of adverse side effects.Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claimsor any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials.The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause usto stop seeking additional clearances or approvals for our ApoTainer selection kits, abandon our ApoGraft technology platform or delay development of otherproduct candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize aproduct candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’sprofile.6We might be unable to develop product candidates that will achieve commercial success in a timely and costeffective manner, or ever.Even if regulatory authorities approve our ApoTainer selection kits or any other product we develop, they may not be commercially successful. OurApoTainer selection kits or any other product we develop may not be commercially successful because government agencies and other thirdparty payors may notcover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products,even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adverselyaffecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency,or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types ofstudies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing ourproducts. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any ApoTainer selection kits or any other productwe develop for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursementof costs by government agencies and other thirdparty payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness ofalternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other thirdparty payorsdo not accept our products, we will not be able to generate significant revenue.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.We intend to seek regulatory approval for our ApoTainer selection kits in a number of countries outside of the United States and expect that thesecountries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in eachmarket and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures varyfrom country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority doesnot ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatoryapprovals and may not receive necessary approvals to commercialize our products in any foreign market.If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as anorphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drugmarketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a fullNew Drug Application, or NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may notreceive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drugexclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unableto assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.7The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for lifethreatening or chronicallydebilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivityfollowing drug approval, subject to reduction to six years if the designation criteria are no longer met.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if theFDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.Although we believe that our ApoGraft technology platform has broad application, because we have limited financial and managerial resources, we arecurrently focused on development of our ApoTainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, wemay forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Ourresource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and futureresearch and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accuratelyevaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate throughcollaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or anyfuture product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our ApoTainer selectionkits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell ourApoTainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and otherdevelopment and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentiallyimproving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, ourdevelopment of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on ourbusiness prospects.If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which couldaffect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm ourreputation.If we or our manufacturers or other thirdparty contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject toregulatory actions, which could affect our ability to develop, market and sell our ApoTainer selection kits or any future product candidates under developmentsuccessfully and could harm our reputation and lead to reduced demand for or nonacceptance of our proposed product candidates by the market. Even technicalrecommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make themanufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. Themode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longercommercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional BiosafetyCommittee, which may delay or make impossible clinical testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem aproduct candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.8Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducingsignal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we have a sufficient supplyof FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future planned clinical trials. We have experienced delays inthe supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturing process through a contract manufacturer to supplyus with sufficient FasL for future planned clinical trials. If our current supplier or any other supplier suffers a major natural or manmade disaster at its manufacturingfacility, or if they otherwise cease to supply to us, then this could result in further delays in our clinical studies and may delay product testing and potentialregulatory approval until a qualified alternative supplier is identified. With respect to other raw materials for the ApoGraft technology platform, although alternativesources of supply exist, it could be expensive and take a significant amount of time to arrange for alternative suppliers. If our manufacturers or we are unable topurchase any key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would bedelayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability tomarket and sell our products.Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and thirdpartypayors to decrease costs. Thirdparty payors are increasingly challenging the prices charged for medical products and services and instituting cost containmentmeasures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limitedMedicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments toproviders by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase newtechnologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek tocontrol healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the futurethat limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limitreimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using ourproducts will be reimbursed at a costeffective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countrieswhere we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtaininternational reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell ourproducts and have a material adverse effect on our business and financial condition.Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in thehealthcare reform laws.PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in theUnited States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over thenext decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bimonthly paymentsand quarterly reporting. Once we market products, we will be subject to this or any future excise tax on our sales of certain medical devices in the United States. Tothe extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will besubject to this 2.3% excise tax.9Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of,stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stemcells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem celltechnologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns aboutour stem cell technology could materially hurt the market acceptance of our technologies.Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, arevulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war, and telecommunication and electricalfailures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the lossof clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets orinappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees,access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could bedelayed. We may also be vulnerable to cyberattacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidentialinformation and/or our financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflictreputational harm upon us that may result in decreased market value and erode public trust.The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain ourmanagement and consulting team could have a material adverse effect on our business, financial condition or results of operations.Our senior management and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business,particularly Dr. Shai Yarkoni, our Chief Executive Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or anyother key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability toattract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our currentand future products. As of the date of this annual report, we do not have keyman insurance on any of our officers or consultants.As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development,maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employeesor consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on ourbusiness, financial condition and results of operation.10We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never beprofitable.The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cellbased therapies and/or devicesdesigned to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical,biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States andabroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than wedo, and have substantially greater financial resources than we do, as well as significantly greater experience in:●developing stem cell selection technology;●undertaking preclinical testing and human clinical trials;●obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;●manufacturing medical devices; and●launching, marketing and selling medical devices.We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, whichdominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adiposederived stemand regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and futureclinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD, a lifethreatening condition associated with allogeneic HSCT.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe,however, that many of these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhancetheir inhouse processes.If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our ApoGrafttechnology platform or ApoTainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing andcommercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors mayalso develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or noncompetitive. If we cannotsuccessfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control.Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also competewith us to:●attract parties for acquisitions, joint ventures or other collaboration;●license proprietary technology that is competitive with ApoGraft technology platform or ApoTainer selection kits;●attract funding; and●attract and hire scientific talent and other qualified personnel.11Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we willneed to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commerciallyreasonable terms, if at all.A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities couldhave a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our productcandidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims orclass actions brought against us, with or without merit, could result in:●liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then berequired to pay from other sources, if available;●an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability torenew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;●withdrawal of clinical trial volunteers or patients;●damage to our reputation and the reputation of our products, including loss of any future market share;●regulatory investigations that could require costly recalls or product modifications;●litigation costs; and●diversion of management’s attention from managing our business.We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. If any of ourproduct candidates are sold commercially, we will seek product liability insurance coverage. We cannot assure you that we will be able to maintain clinical trial orobtain and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or insufficient amounts to protect against potential losses.If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our businessmay experience serious adverse consequences.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcarefraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing andbusiness arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, selfdealing and other abusivepractices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, whichcould result in regulatory sanctions and serious harm to our reputation.Our board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs on NASDAQ. However, it is not always possibleto identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could havea significant impact on our business, including the imposition of significant fines or other sanctions.12In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding ourbusiness, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to bebrought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such aclaim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks importantto the success of our business.We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results ofoperations and financial condition.We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, includingpotentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human andcapital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls toexpand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhanceour operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable toscale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, thenwe will not be able to successfully commercialize our ApoGraft technology platform, our ApoTainer selection kits or any future product candidate. Failure to attractand retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, themanagement, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel andto improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on ourbusiness, results of operations and financial condition.If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss ordamage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtainingadequate directors’ and officers’ liability insurance.Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our ApoTainer selection kitsor any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects,financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may onlymitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claimsmade against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers anddirectors to manage us.Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and relatedfinancial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and creditavailability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have takenunprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financialmarkets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability toraise capital, if needed, on a timely basis and on acceptable terms or at all.13Our current management team has limited experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately complywith federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results ofoperations and financial condition.Our current management team has a limited experience managing and operating a publicly traded U.S. company. Failure to comply or adequately complywith any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results ofoperation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.Risks Related to Our Intellectual PropertyWe rely upon patents to protect our technology.The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of ourcurrent or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may notprovide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applicationsfor, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office (USPTO) and foreign patent agencies in severalstages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee orby other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patentapplication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of apatent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, nonpayment of fees and failure toproperly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect onour business.We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, timeconsuming and ultimatelyunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and timeconsuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent ofours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated or interpreted narrowly, which could adversely affect us.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain andcould have a material adverse effect on the success of our business.Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietaryrights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has beenbrought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology oruse of our technology does not infringe thirdparty patents. It is also possible that we have failed to identify relevant thirdparty patents or applications that mayhave been issued or pending in the US or in a foreign jurisdiction. For example, applications filed before November 29, 2000 and certain applications filed after thatdate that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are publishedapproximately 18 months after the earliest date which they are entitled to, which is referred to as the priority date. Therefore, it cannot be ruled out that patentapplications covering our technology were filed by others in the last 18 months about which about which we cannot have any knowledge. Additionally, pendingpatent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology.14We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to ourtechnology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assertinfringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developingand marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtaina license, it could be nonexclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, tocease commercializing the infringing technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we arefound to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have asimilar negative impact on our business.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, thelaws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents todevelop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that inthe United States and Israel.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems ofcertain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property,particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents ormarketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreignjurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from otheraspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not becommercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe anddeveloping countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party,which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.15We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual propertyto compete against us.Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the nondisclosure ofconfidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments,discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek toenter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize orindependently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with ourPowered by Cellect technology platform, our ApoTainer selection kits or any future product candidate. If a dispute arises, a court may determine that the rightbelongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary knowhow that weseek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ,we still face the risk that:●these agreements may be breached;●these agreements may not provide adequate remedies for the applicable type of breach;●our proprietary knowhow will otherwise become known; or●our competitors will independently develop similar technology or proprietary information.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:●others may be able to develop technology that is similar to our Powered by Cellect technology platform, our ApoTainer selection kits or any futureproduct candidate, but that is not covered by the claims of the patents that we own;●we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed;●we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;●others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights;●it is possible that our pending patent applications will not lead to issued patents;●issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors;●our competitors might conduct research and development activities in countries where we do not have patent rights and then use the informationlearned from such activities to develop competitive products for sale in our major commercial markets;●we may not develop additional proprietary technologies that are patentable; and●the patents of others may have an adverse effect on our business.16We may be subject to claims challenging the inventorship of our patents and other intellectual property.We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or coinventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developingour product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectualproperty. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to management and other employees. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives apatent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if theemployee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The IsraeliSupreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claimtheir right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our futurerevenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectualproperty, which in turn could impact our future profitability.Risks Related to Our Operations in IsraelPotential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research anddevelopment facilities are located, may adversely affect our results of operations.Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officersand most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect ourbusiness and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboringcountries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations andresults of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia groupand political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas,the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missilesbeing fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikesagainst civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected businessconditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities andtowns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially largernumber of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activityin the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of amilitary regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previouslyoutlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peacefuland diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countriesin the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflictin Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead todeterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causingadditional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed tohave a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, aviolent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’sactivities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. Thesesituations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instabilityin the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties withwhom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary inorder to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict businesswith the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition orthe expansion of our business.17Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws,against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the UnitedStates. Service of process upon us or our nonU.S. resident directors and officers and enforcement of judgments obtained in the United States against us or ournonU.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may bedifficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federalsecurities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not bethe most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a timeconsuming and costlyprocess. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israelicourts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance withanother judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israelicourt will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject toexceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors frombenefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective oftheir agreements with us, which in turn could impact our future profitability.We generally enter into noncompetition agreements with our employees and key consultants. These agreements prohibit our employees and keyconsultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable toenforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefittingfrom the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce noncompete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of materialinterests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of itsintellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise ofour former employees or consultants and our ability to remain competitive may be diminished.18In addition, Chapter 8 to the Israeli Patents Law, 57271967, or the Patents Law, deals with inventions made in the course of an employee’s service andduring his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is noagreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation,such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from hisemployer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer.The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions doesnot rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Courtfor further discussion and therefore the ultimate outcome has yet to be resolved. As a result, it is unclear if, and to what extent, our research and developmentemployees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims aresuccessful, which in turn could impact our future profitability.Your rights and responsibilities as as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities ofshareholders of U.S. corporations.Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.based corporations. In particular, a shareholderof an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us andother shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters,such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that requireshareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or ashareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder ofours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “BoardPractices — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, theparameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to imposeadditional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control,even when the terms of such a transaction are favorable to us and our shareholders.Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals fortransactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, amerger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the IsraelRegistrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majorityof each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% ofthe issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, exceptthat if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by amajority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and the shareholders, including thosewho indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition the court to alter theconsideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).19Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of our shareholders whose country of residence doesnot have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize taxfree share exchanges to the sameextent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment ofnumerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participatingcompanies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomespayable even if no actual disposition of the shares has occurred.These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition ormerger would be beneficial to us or to our shareholders.Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuationsand inflation.Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result,we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect usfrom adverse effects.Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response toincreases in terrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in thefuture. Our operations could be disrupted by such callups, which may include the callup of members of our management. Such disruption could materiallyadversely affect our business, financial condition and results of operations.Risks Related to the Ownership of Our ADSs or Warrants or Ordinary SharesIf we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ordinary shares, ADSs or warrants could have adverse U.S. income taxconsequences.If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S.Holder (as defined below) owns ordinary shares, ADSs, or warrants, such U.S. Holder could be liable for additional taxes and interest charges upon certaindistributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, ADSs, or warrants whether or notwe continue to be a PFIC. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive, there can be noassurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares, ADSs, or warrants during a period when we are aPFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a “qualified electing fund” or“marktomarket” election. A U.S. Holder may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning ordinary shares,ADSs, or warrants, provided that such U.S. Holder is eligible to make, and successfully makes, a “marktomarket” election. U.S. Holders could also mitigate some ofthe adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election. Upon request, we expect toprovide the information necessary for U.S. Holders to make “qualified electing fund” elections if we are classified as a PFIC. U.S. Holders are strongly urged toconsult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualifiedelecting fund” or “marktomarket” election with respect to our ordinary shares, ADSs, and warrants in the event we that qualify as a PFIC. For more information see“Taxation — U.S. Federal Income Tax Considerations.”20Failure to achieve and maintain effective internal controls in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect onour business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,which could have a material adverse effect on the price of the ADSs.Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and testour internal control procedures in order to satisfy the requirements of Section 404 of the SarbanesOxley Act, which requires annual management assessments of theeffectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified,supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies orweaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reportedfinancial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, ouroperating results could be harmed.As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, whichcould make the ADSs or warrants less attractive to investors.For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and otherregulatory requirements that are generally unavailable to other public companies, including:●an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting required by Section 404 ofthe SarbanesOxley Act; and●an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to theauditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registrationstatement, (iii) the date on which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we aredeemed a “large accelerated filer” as defined in Regulation SK under the Securities Act of 1933, as amended (the “Securities Act”).We cannot predict if investors will find the ADSs or warrants less attractive because we may rely on these exemptions. If some investors find the ADSs orwarrants less attractive as a result, there may be a less active trading market for the ADSs or warrants and the market price of the ADSs may be more volatile.We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and ExchangeCommission (the “SEC”). Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we will be subject to reporting obligations that, in certainrespects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxystatements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulationspromulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose thecompensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli publiccompanies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will alsohave four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly asU.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions andshortswing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD(Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protectionsavailable to you in comparison to those applicable to a U.S. domestic reporting companies.21As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicableSEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.As a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required underthe listing rules of NASDAQ for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directorsindependence requirements, director nomination procedures, compensation committe matters. In addition, we will follow our home country law instead of the listingrules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedcompensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% orgreater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporategovernance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that wouldotherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQapplicable to domestic U.S. issuers. See Item 16.G. “Corporate Governance”If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change theirrecommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negativelyimpacted.The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business,our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or providefavorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs or warrants, or provide more favorablerelative recommendations about our competitors, the price of the ADSs or warrants would likely decline. If any analyst who may cover us were to cease coverage ofour company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSsor warrants or their trading volume.The market price for the ADSs and warrants may be volatile.The market price for the ADSs and warrants is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including thefollowing:●our failure to obtain the approvals necessary to commence clinical trials;●results of clinical and preclinical studies;●announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;●announcements of technological innovations, new products or product enhancements by us or others;22●adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;●changes or developments in laws, regulations or decisions applicable to our product candidates or patents;●any adverse changes to our relationship with manufacturers or suppliers;●announcements concerning our competitors or the regenerative medicine or healthcare industries in general;●achievement of expected product sales and profitability or our failure to meet expectations;●our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual propertyinfringement actions;●any major changes in our board of directors, management or other key personnel;●announcements by us of significant strategic partnerships, outlicensing, inlicensing, joint ventures, acquisitions or capital commitments;●expiration or terminations of licenses, research contracts or other collaboration agreements;●public concern as to the safety of our products that we, our licensees or others develop;●success of research and development projects;●developments concerning intellectual property rights or regulatory approvals;●variations in our and our competitors’ results of operations;●changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs or the warrants are covered byanalysts;●future issuances of ordinary shares, ADSs or warrants or other securities;●general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, includingfactors unrelated to our operating performance; and●the other factors described in this “Risk Factors” section.These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and warrants, which would resultin substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are notrelated to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSsand warrants.23Substantial future sales or perceived potential sales of our ordinary shares or ADSs or warrants in the public market could cause the price of our ordinaryshares or the ADSs or warrants to decline.Substantial sales of our ordinary shares, ADSs or warrants, either on the TASE or on NASDAQ, as applicable, may cause the market price of our ordinaryshares, ADSs and warrants to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our securityholders of substantial amounts of our ordinary shares, ADSs or warrants, or the perception that these sales may occur in the future, could cause a reduction in themarket price of our ordinary shares, ADSs or warrants. The issuance of any additional ordinary shares or any additional ADSs or warrants, or any securities that areexercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs or warrants andwill have a dilutive effect on our existing shareholders and holders of ADSs or warrants.We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors maynot benefit from holding our securities.We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares inthe foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. As a result, investors in the ADSs orordinary shares, or investors who exercise the warrants, will not be able to benefit from owning these securities unless their market price becomes greater than theprice paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess ofthe price paid.You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you maynot receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make themavailable to you.The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions, if any, in proportion to the number of ordinaryshares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holdersof ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act,but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currencythat was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof,which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effecta substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute.We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also haveno obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositarymay withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes itis required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinaryshares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make themavailable to you. These restrictions may cause a material decline in the value of the ADSs.Holders of ADSs must act through the depositary to exercise their rights as our shareholders.Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinaryshares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholdersmeeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened,holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their votewith respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out theirvoting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner,but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, thedepositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of anysuch vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested.In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.24You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when itdeems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generallywhen our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the depositagreement.Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholdersvote.Our board of directors has the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissuedshares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence overmatters on which our shareholders vote.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyOur legal and commercial name is Cellect Biotechnology Ltd. We were established as a private company limited by shares under the laws of the State ofIsrael on August 4, 1986, under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when wechanged our name from T.R.F. Capital Ltd. to Cellect Biomed Ltd. On May 16, 2016, we obtained shareholder approval to change our name to Cellect BiotechnologyLtd. We formally changed our name to Cellect Biotechnology Ltd. on July 21, 2016. On July 29, 2016, our ADSs and warrants, commenced trading on The NasdaqCapital Market under the symbols “APOP” and “APOPW”, respectively. From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a generalmeeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics. As a result of the merger, which closed on July 1, 2013,Cellect Biotherapeutics became a fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1)exercisable for 227,358 ordinary shares, and options (Series 2) exercisable for 341,037 ordinary shares (all of such 341,037 options were subsequently exercised intoordinary shares), which constituted approximately 85% of our then outstanding share capital and 85% of our then outstanding share capital on a fully diluted basis.Cellect Biotherapeutics was established as a private company limited by shares under the State of Israel on June 9, 2011 for the purpose of developingnovel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptableselection methods and increasing the chances of success of stem cell therapies.Our principal offices are located at 23 HaTa’as St., Kfar Saba, Israel 44425, and our telephone number is +97299741444. Our primary internet address iswww.cellect.co. None of the information on our website is incorporated by reference herein. Vcorp Services, LLC is our agent for service of process in the UnitedStates, and its address is 25 Robert Pitt Drive, Suite 204 Monsey, New York 10952.We use our website (http://www.cellect.co) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website and social media channels are not, however, a part of this annual report.25We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, andintend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companiesincluding but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the SarbanesOxley Act. Wewill be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,(ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the dateon which we have, during the previous threeyear period, issued more than $1 billion in nonconvertible debt or (iv) the date on which we are deemed a “largeaccelerated filer” as defined in Regulation SK under the Securities Act, which means the market value of our ordinary shares that is held by nonaffiliates exceeds$700 million as of the prior June 30th.We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exemptsus from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the shortswingprofits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Inaddition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domesticcompanies registered under the Exchange Act.Our capital expenditures for December 31, 2017, 2016 and 2015 amounted to NIS 0.3 million (approximately $0.09 million), NIS 0.6 million (approximately $0.15million), and NIS 1.0 million (approximately $0.26 million), respectively. Our purchases of fixed assets primarily include laboratory equipment used for thedevelopment of our clinical treatment. We financed these expenditures primarily from cash on hand.B.Business Overview We are an emerging biotechnology company that has developed a novel technology platform known as ApoGraft that functionally selects stem cells inorder to improve the safety and efficacy of regenerative medicine and stem cell therapies. We aim to become the standard enabling technology for the enrichment ofthe stem cell population for companies developing stem cell therapies, for physicians practicing regenerative medicine and for researchers and academia engaged instem cell research.We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection ofstem cells. Efficient selection enables retention of most of the stem cells from various starting bulk of cells while neutralizing harmful mature cells from this bulk ofraw material. Animal models suggest that this process results in dramatic decrease of toxicity coupled with the enrichment of the stem cell population.Our ApoGraft technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process ofprogrammed cell death and is a vital part of physiological development and homeostasis of all organisms. Stem cells flourish in an environment where normal cellsdie because their major role is reconstitution of damaged tissue. Stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activityand apoptoticinducing signals.We are currently developing our first product based on our ApoGraft technology platform, the ApoTainer selection kit. The ApoTainer selection kit is aneasy to use, cost effective, off the shelf stem cell selection kit. The ApoGraft technology platform is being tested for clinical use in allogeneic (using stem cells froma donor) hematopoietic stem cell transplantation, or HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT,also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that HSCTcan also be used for other nonmalignant indications (such as autoimmune diseases), but is rarely used due to severe toxicity. Application of allogeneic HSCT islimited by graftversushostdisease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells)recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is a major cause of transplantrelated morbidity and mortality.Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reducedtoxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients withlife threatening advanced diseases. Due to nonefficient selection of stem cells for HSCT, the complex and expansive laboratory process performed usingtechnologies currently available is able to reduce toxicity only at a significant tradeoff — failure of engraftment, graft rejection, cancer reoccurrence and high costsof treatment.26We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technology platform inorder to clinically validate that our technology can efficiently select stem cells resulting in neutralizing harmful cells and their associated medical complications. Webelieve that demonstrating the safety of our technology for this indication will validate the use of our ApoGraft technology platform for the treatment of otherindications (e.g., nonmalignant bone marrow failure, solid organ transplantation and autoimmune diseases) and consequently for the adoption of our ApoGrafttechnology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population. In that regard, we believe thatafter the first reported results of our human trials, as discussed further below, we will achieve validation of our product’s safety profile, which may result inexpediting further development of our technology for multiple indications, even before marketing approval is obtained. In addition, we believe such validation of ourproof of concept will provide us with the opportunity to license our ApoGraft technology platform in the near term.We plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the Center for BiologicsEvaluation and Research, or CBER. The term “combination product”, when used to describe our ApoTainer selection kits, refers to a product, regulated by the FDA,which is comprised of a consumable medical device (container) with a biological activity.In September 2017, we announced that the FDA granted orphan drug designation for ApoGraft for the prevention of acute and chronic GvHD in transplantpatients. We plan in the future to apply for fast track and breakthrough technology, which, if received, would result in a reduced cost of development and expeditedmarketing approvals, however there is no assurance that such designations will ever be obtained.Our development efforts to date have primarily culminated in two studies performed on human HSCT grafts. The first study was performed during 2015 2016. In this study we used small portions received under ethical committee approval from human donors to validate and optimize the process, and show robustnessand repeatability of the process. More than 100 ApoGraft samples were analyzed for the different effects on the various groups of cells (stem and mature immune) aswell as their functional capabilities (such as migration, colony formation and anticancer activity). The samples represented 5% of a graft used for transplantationinto patients. The grafts were processed in vitro and in vivo (mice) allowing stem cell production for transplantation using ApoGraft. The use of the ApoGraftresulted in a significant increase in the death of certain mature immune cells, primarily unique subsets of T Lymphocytes, without compromising the quantity andquality of stem cells.The second study, which was initiated in the first quarter of 2017, is a Phase I/II, dose escalating, 4cohort, open label clinical trial of up to twelve patientsdesigned to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that underwent our ApoGraftprocess and were transplanted into patients with hematological malignancies in an allogeneic hematopoietic stem cell transplantation. The primary endpoint of thestudy is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation. The first patient wasrecruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients have demonstrated completeacceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, and no reported seriousadverse events or suspected unexpected serious adverse reactions.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.27We aim to commence a second human ApoGraft trial in the United States and/or Europe in the first half of 2019. In May 2017, we announced that the FDAprovided us with preInvestigational New Drug (IND) meeting minutes supporting an IND submission for ApoGraft. We hope to initiate a pivotal study for ourApoTainer selection kits in 2019.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of our selection platform technology on stem cells derived from fat tissues. The study comprised samples obtained via liposuction from over20 adult patients and was conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (IchilovHospital). Fatderived stem cells were treated according to our protocols and have shown that our selection platform technology led to both an expansion of cellsand an improvement in their unique cell activity and attributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantlyafter only a short incubation.We aim to commence a Phase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.Our StrategyWe have developed a novel technology platform, the ApoGraft technology platform, for the functional selection of adult stem cells. This technology isexpected to improve the safety and efficacy of regenerative medicine and stem cell therapies by a cost effective method of achieving stem cells for any indication inquality, quantity and competitive price. We aim to become the standard enabling technology for the enrichment of stem cells and manufacturing of any adult stemcells based products for companies developing stem cell therapies and for researchers and academia engaged in adult stem cell research.Key elements of our strategy to accomplish this objective include the following:●Achieve relatively quick validation of the use of our ApoGraft technology platform in a clinical setting.We have chosen allogeneic HSCT for thetreatment of hematological malignancies as our first target indication for our ApoGraft technology platform in order to clinically validate that ourtechnology can efficiently select stem cells while eliminating harmful cells and consequently the medical complications such as GvHD. We believehematopoietic cells transplantation to patients undergoing allogeneic HSCT can be dramatically improved. Based on our ApoGraft technologyplatform, we are currently developing the ApoTainer selection kit, an off the shelf stem cell selection kit, which we believe may significantlyimprove the therapeutic potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity andmortality of the procedure. We believe that the concomitant reduction of toxicity of allogeneic HSCT will allow clinicians to undertake HSCT earlierin the blood cancer treatment routine. Typically, combination products are expected to obtain relatively quicker validation from the FDA and theEMA when compared to pharmaceutical/ biological products. Based on our initial consultations with our U.S. and European regulatoryconsultants, we believe that we might only need to successfully complete a single pivotal study with a relatively small number of patients toobtain marketing approval of our ApoTainer selection kit for allogeneic HSCT. We believe such a study can be completed in approximately two tothree years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur asquickly as we hope, if at all. In addition, we believe that our product may achieve “breakthrough” designation with the FDA, enabling a fast trackreview and approval process by the FDA however there is no assurance that such designations will ever be obtained. Typically, the validationprocess for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validationprocess timeline, we believe our technology platform may complete the validation process relatively quickly.28●Leverage our scientific, clinical and regulatory expertise to build and advance our ApoGraft technology platform beyond the allogeneic HSCTsetting. Based on the validation of our ApoTainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for otherindications such as nonmalignant failures of the bone marrow (i.e. aplastic anemia ), solid organ transplantation and autoimmune systemdisorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our ApoGraft technology platform for othersources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that byexpanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of ourApoGraft technology platform.●Build a diversified product portfolio. Beginning with the development of our ApoTainer selection kit as a combination product or medical device,which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio ofApoGraft based products for a broad spectrum of market segments, up to and including all production and research processes for stem cell basedproducts. The pipeline of products is designed to address different markets beyond the clinical use such as products for research purposes andtools for manufacturing facilities for cell therapies and especially adult stem cells.●Selectively engage in strategic partnerships that establish our ApoGraft technology platform as the standard enabling technology for theenrichment of the stem cell population. We ultimately seek to collaborate with other companies engaged in developing stem cell therapies. Byincorporating our ApoGraft technology into their manufacturing process we will be able to significantly reduce their cost of manufacturing whileimproving the end products. As we believe our ApoGraft technology will significantly increase the yields of the first step of manufacturing(harvesting the stem cells) from any source of stem cells (i.e. blood, bone marrow, fat) and will result in a more purified bulk of stem cells, the nextsteps needed to reach the final products will be shorter, more efficient, less costly and result in a better product. During 2017, we partnered with aBostonbased lifescience advisory firm to seek strategic licensing deals and global pharma partnerships.In the short term, we are currently focused on achieving the following critical milestones:●Pathway to firstinhuman proof of concept: We are currently enrolling patients to a Phase I/II study performed on cancer patients undergoingmatched related allogeneic HSCT. This Phase I/II trial was approved by the Israeli Ministry of Health and is being conducted at the RambamMedical Center and Hadassah Medical Center.●Pathway to product prototype: We are engaged in developing prototypes of our ApoTainer selection kit. We demonstrated a proof of concept forthe binding of the apoptotic protein to a polymer while preserving the protein’s apoptotic activity. We tested a number of polymers and bindingmethods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the first prototypeApoTainer selection kit by the first quarter of 2018.●Patent portfolio enhancement: We are currently expanding our patent coverage from our current seven patent families by applying for additionalpatents for inventions created during the development. In addition, we are seeking relevant patents available for in licensing.In the long term, we are focused on leveraging our key assets, including our intellectual property, our development team and our facilities, to advance ourtechnologies and are pursuing strategic collaborations with members of academia and industry.Regenerative Medicine and Cell TherapyOur business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Mason& Dunnill in Regenerative Medicine (2008, 3(1), 15), regenerative medicine is the process of replacing or regenerating human cells, tissues or organs to restore orestablish normal function. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body byrejuvenating damaged tissue and by stimulating the body’s own repair mechanisms to heal previously irreparable tissues and organs.29Medical cell therapies are classified into two types: allogeneic (cells from a donor) or autologous (cells from one’s own body), with each offering its owndistinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthydonor. The use of healthy donors’ stem cells is severely limited by the accompanied immune cells of the donor which may attack cells or organs of the transplantedpatient. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells istherefore the bottle neck of all stem cell based therapies.Regenerative medicine can be categorized into major subfields as follows:●Cell Therapy. Cell therapy involves the use of cells, whether derived from adults, children or embryos, healthy donors or patients, from variousparts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immunetherapy,arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries.This subfield also includes the development of growth factors and sera and natural reagents that promote and guide cell development.●Tissue Engineering. This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fullyfunctional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used asbiomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquelyattractive for certain applications. Therapeutic applications may include heart patch, bone regrowth, wound repair, replacement neourinaryconduits, saphenous arterial grafts, intervertebral disc and spinal cord repair.●Diagnostics and Lab Services. This subfield involves the production and derivation of cell lines that may be used for the development of drugsand treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized forregenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cellbaseddiagnostic tools.All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through itslifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmeticapplications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Sincethe 1970s, bone marrow and then blood and umbilical cordderived stem cells have been used to restore immune system cells mainly after chemotherapy andradiation used to treat many cancers. These types of cell therapies have been approved for use worldwide and are typically reimbursed by insurance.Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (selfderived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. DendreonCorporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of celltherapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Celltherapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bonediseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holdspromise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating toaging.30Market for CellBased TherapiesAccording to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018,achieving high revenue growth from 2015 to 2025.●The global population is aging. According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 andolder by 2050, which means an increased prevalence of agerelated disease in general and chronic disease in particular. Heavily burdenedhealthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just theirsymptoms.●Expansion of stem cell therapies. Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases,neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials hasbeen gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.●Potential new source of stem cells. The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newbornblood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations atthe expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatmentof bone, cartilage and skeleton related diseases as well as for esthetic purposes.●Increasing government, strategic partner, and investor support for stem cell research and development. According to the Alliance forRegenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to theNational Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.273 billion in2013 to $1.582 billion in 2017.Our Current Focus: Proof of Concept of our ApoGraft technology platform through the treatment of Haematological MalignanciesHaematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignanciesinvolves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, ofwhich 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneicprocedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiplyand differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donorand the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to GvHD.GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bonemarrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. Acute GvHD, which usually occurs up to 100days post transplantation, is associated with diarrhea, rash, liver damage and, in severe cases, can be lifethreatening. Chronic GvHD, which usually appears laterthan three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immunesystem using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vitalorgans and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients arenonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations.These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy forcancer and autoimmune diseases.31GvHD can be prevented by depletion of the Tcell population from the donor graft prior to transplantation. Methods used to capture and purge Tcells outof the donor graft include using antithymocyte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCTengraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging Tcells can result inincreased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancerrecurrence.Due to these and other complications and due to the extremely aggressive pretreatment chemotherapy and irradiation conditioning regimens, allogeneicHSCT is usually used only when the patient faces lifethreatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently foreven more effective treatment of blood cancers. There is widespread awareness of the need for improved immunesystem management technologies for HSCT —both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients andthose with earlierstage diseases.The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with theinherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance fororgan transplantation.We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our ApoGraft technologyplatform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complicationscaused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of ourtechnology as an important driver of a much broader utility of our platform technology.An Unmet Need: Efficient Stem Cell SelectionTypically, there is a very small number of stem cells in the source tissue and, once removed from the body, these cells have the propensity to differentiateand lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples isa serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another criticalproblem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.There are currently two main methods for attaining a critical mass of stem cells:●Morphological stem cell selection:Negative selection approach: Elimination of the cells including those that contribute to engraftment, usually T cells. It uses T cellspecific antigenscommon to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinicaloutcome is reduced engraftment and reoccurrence of the tumor.Positive selection approach: Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore asignificant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reducesengraftment.Both of these approaches have a poor efficacy/toxicity ratio.●Stem cell population expansion:Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level ofdifferentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintainedand differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demandsrelated to longterm culturing create a significant challenge for these companies.32In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify thebiological sample prior to transplantation. We believe our novel ApoGraft technology platform that quickly and effectively enriches the stem cell population whileeliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.Our first target market for our ApoGraft technology platform is allogeneic HSCT for hematological malignancies. According to the Center for InternationalBlood & Marrow Transplant Research, over 8,000 allogeneic HSCTs were performed in the United States in 2015. A 2013 survey conducted by the European Groupfor Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemia and forlymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us toprove the benefits of our ApoGraft technology platform.Our Proprietary Stem Cell Technology PlatformWe believe our innovative ApoGraft technology platform represents a potential breakthrough in the field of regenerative medicine through the functionalselection of stem cells.Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. NadirAskenasy, our former Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiologicalfeatures of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverseeffects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome oftransplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part ofphysiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are oftencharacterized as disaster areas in which there are very high levels of apoptotic activity and apoptoticinducing agents. Our research has demonstrated that stemcells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to selfdestruct. We have chosen this functional characteristic ofstem cells to use apoptosisinducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at thesame time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a reduction intreatment cost.The ApoGraft ProcessTo achieve functional selection of stem cells utilizing our ApoGraft technology platform, we have developed the ApoGraft process, which is intended forthe prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem andprogenitor cells. Following collection of the cells from a matched related donor, the donor graft is incubated for 2 hours in the presence of FasL, washed twice andtransplanted via intravenous administration. FasL, also known as CD95L, is a typeII transmembrane protein that belongs to the tumor necrosis alpha family. Thebinding of FasL with its receptor induces in mature cells apoptosis (programmed cell death) that plays an important role in the development, homeostasis, andfunction of the immune system (and most cells of all multicellular organisms).The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name MegaFasL. Apo010 (the MegaFasLbased clinical grade material) is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates itsreceptor and leads to apoptosis in susceptible cell populations.33The ApoGraft process is illustrated below:ApoTainer Selection KitOur first product that is currently being developed, the ApoTainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit forclinical laboratories designed to improve the results of human allogeneic HSCT.34The ApoTainer selection kit is a specialized infusion bag. With internal apoptotic inducing capabilities, the ApoTainer selection kit is designed to create amicroenvironment intended to induce apoptosis by creating an exvivo microenvironment that resembles the normal physiological conditions where stem cells canmigrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.Our preclinical research has shown that FasL appears to be active when immobilized, as in the case of its binding to the film of the ApoTainer selection kit.This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.The ApoTainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering from hematological malignanciesin which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHDcausing cells expressing the Fasreceptor to bind to the surfacebound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The ApoTainer selection kit thus is expected toharness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that arethen transfused to the patient.Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal containerenabling positive biological activity of FasL while tightly bound. We believe that this polymerbinderFasL complex is the basis not only for the ApoTainer selectionkit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.35Preclinical StudiesAs part of our invitro studies, and prior to animal studies, we performed experiments to determine which apoptotic molecules have the best differentialeffect on stem and nonstem cells. We have conducted fifteen animal studies including murine to murine and human cells to murine transplantation modelsmeasuring the relevant effects (GvHD, GvL, mortality and engraftment). We have also tested various sources of human hematopoietic cells (mobilized peripheralblood, bone marrow and umbilical cord blood). Major preliminary findings include the following:●Resistance to receptormediated apoptosis is an inherent characteristic of stem and progenitor cells;●The ApoGraft process preserves stem and progenitor cells;●Preservation of successful engraftment (95% engraftment in experiments performed by by a contract research organization);●Demonstrated preservation of antitumor activity;●Apoptosisinsensitive progenitors are privileged for engraftment through competitive advantage over the apoptosissensitive differentiated cells;●Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate (20–100% to <10%); and●Significant reduction of cells that attack the immune system.We believe these preliminary findings support our product claim for:●Selection of stem and progenitor cells based on insensitivity to receptormediated apoptosis from all sources;●Ex vivo selective depletion of GvHD causing cells;●Accelerated engraftment by ex vivo treatment of umbilical cord blood; and●Induction of tolerance to grafts and suppression of autoimmunity.We also achieved an important milestone in the development of our stem cell selection kits. In collaboration with our partner (Entegris) we screened formany polymers based matrixes and looked at their ability to bind FasL in a way preserving the biological activity of the apoptotic agent. In a few cases we were ableto establish complex binding coupled with biological activity. This project is ongoing and we hope to establish the specific conditions needed for such interactionson the relevant cells.In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yieldenhancingmaterials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in thedevelopment of the polymer film that will be used for the manufacturing of the ApoTainer selection kit. The Entegris Agreement contemplates that upon successfuldevelopment of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegrisdefaults in this obligation, we may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final productsales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design,engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the preclinical development of theproduct. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives,timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews forsuccessive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOWthereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of abreach, in the event of a nonmonetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of thenonterminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days ofits filing.36On June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditOn June 14, 2016, we were advised that we were eligible for an award consisting of a $0.9 million (approximately NIS 3.5 million) conditional grant by theBIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israelicompanies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluatorsappointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry.The grant was dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us whichwe entered into during 2017. Pursuant to the terms of the CPFA, the BIRD Foundation will provide a grant to Entegris and us of up to $0.9 million. Pursuant to theterms of the CPFA, we and Entegris will be required to repay the total sum of the grant, linked to the U.S. Consumer Price Index from date of receipt of each payment,of 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five ormore years, respectively, of the project completion date. The CPFA also requires that we and Entegris commence repayments at the rate of 5% of each dollar reportedas revenue derived from the product, or subsequent products, funded by the project. In addition, the CPFA includes a requirement that if the funded product islicensed to a third party 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.Finally, the CPFA includes a requirement that if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grantto the BIRD Foundation, onehalf of the sale proceeds will be applied to the repayment of the grant.In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine modelahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation was performed by a contract research organization. In December2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow thatunderwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, notoxicity was found.NonInterventional Clinical StudiesOn February 21, 2017 we announced positive final results from a noninterventional clinical trial of ApoGraft™ in healthy donors. The study’s primaryobjective was to validate the Company's propriety method of stem cell selection by going through the process of production and characterization with ApoGraft™,and was conducted on samples obtained in collaboration with two medical centers in Israel, The Schneider Children's Medical Center and the Rambam MedicalCenter. The study included samples from 104 healthy donors of blood stem cells. The samples (collected under approval of Helsinki committees) represented 5% of agraft used for transplantation into patients. The cells were exposed to the full process of preparing the ApoGraft. The grafts were processed allowing stem cellproduction for transplantation with Cellect’s ApoGraft. The use of the ApoGraft resulted in a significant increase in the death of mature immune cells, primarily Tlymphocytes, without compromising the quantity and quality of stem cells. The results have shown that the procedure is highly repetitive. The acceptance criteriaand batch release criteria were all set and met. Samples have shown sterility and viability of cells within specs. T cells have shown apoptotic effect while CD34 stemcells were intact. Clonality was not compromised. The overall results were highly correlated with the safety studies performed as part of the preclinical package andsupports the Phase I/II HSCT in blood cancers patients.We are also conducting studies on mesenchymal stem cells derived from fat tissues. In October 2017, we announced positive results from a more than 20patient trial on the use of ApoGraft on stem cells derived from fat tissues. The study conducted with samples obtained via liposuction from over 20 adult patientswas conducted in collaboration with the Plastic Surgery Department and Stem Cells Laboratory of the TelAviv Medical Center (Ichilov Hospital). Fatderived stemcells were treated according to our protocols and have shown that ApoGraft led to both an expansion of cells and an improvement in their unique cell activity andattributes. The ability of those cells to create colonies and differentiate into bone was enhanced significantly after only a short incubation. We aim to commence aPhase I/II trial of ApoGraft on stem cells derived from fat tissues in 2019.37Phase I/II Clinical StudyOn September 12, 2016, we obtained the approval of the Israeli Ministry of Health to initiate a Phase I/II, dose escalating, 4cohort, open label clinical trial ofup to twelve patients designed to evaluate the safety, tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergoour ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. The primaryendpoint of the study is overall incidence, frequency and severity of adverse events potentially related to ApoGraft at 180 days from transplantation.In the study, the graft is taken from the donor through regularly used apheresis and then the cells are exposed to short incubation with FasL and thenundergo washing and centrifugation to remove the FasL. The resulting cells are then transfused to the patient according to routine myeloablative procedures, ortherapeutic modalities, including, but not limited to, chemotherapy, radiotherapy and immunotherapy.The first patient was recruited for this trial in February, 2017, and in January 2018 we reported that after one month followup, the first three patients havedemonstrated complete acceptance of the stem cell transplant with no adverse events related to the study treatment, as determined by the clinical investigator, andno reported serious adverse events or suspected unexpected serious adverse reactions.The study is conducted in two tertiary bone marrow transplant centers in Israel. To that end we entered into agreements with the Rambam Medical Centerin Haifa, Israel and Hadassah Medical Center in Jerusalem, Israel for the purpose of conducting a clinical trial under approval from the local Institutional ReviewBoard and Israeli Ministry of Health at the medical centers.Patients who complete the Phase I/II study will be given the option to enroll in a noninterventional longterm followup study for up to two years posttransplantation to assess incidence, grade and stage of acute GvHD and chronic GvHD, nonrelapse related mortality, disease relapse/recurrence and overallsurvival.Future StudiesWe intend to undertake the following actions during the following twelve to eighteen months:●Continue conducting the ongoing Phase I/II ApoGraft clinical trial;●Commence a second human ApoGraft trial in the United States and/or Europe;●Commence a Phase I/II ApoGraft clinical trial on stem cells derived from fat tissues;●Complete the development of the first prototype of the ApoTainer selection kits;●Develop sterilization methods and ApoTainer selection kits shelf life;●Produce initial batches of the ApoTainer selection kits for clinical trials; and●Meet FDA and/or European regulatory authorities and submit a trial protocol for a clinical trial using the ApoTainer selection kit.38Regulatory StatusOur stem cell kits are still under development. Based on the views of our scientific advisors and following informal discussions with U.S. and Europeanregulatory authorities, we intend to seek regulatory approval of our stem cell kits that we are developing in the United States, Europe and other countries as acombined therapy or Class III “medical device”.Future ApplicationsBeyond the use of our ApoGraft technology platform in the allogeneic HSCT setting for the treatment of hematological malignancies as currentlycontemplated, we believe that our technology platform has the potential for a much broader set of usages:●Use of HSCT earlier in the blood cancer treatment protocol. By reducing HSCT toxicity and other complications while increasing efficacy, webelieve that our stem cell selection kits will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol.●Broadened use of HSCT to nonlife threatening autoimmune disorders. We are considering initiating clinical trials in autoimmune conditionswhere HSCT was proven to be beneficial but it was seldom used because of the inherent toxicity. We believe that if we are able to demonstratesignificant reduction of inherent toxicity, this will help make HSCT eligible for treatment of diseases such as diabetes (Type i), lupus, Crohn'sdisease and the like.●Broadened use of HSCT to organ transplants. It has been known for some time that allogeneic HSCT taken from the same donor enhancestransplantation tolerance. This phenomenon has been observed not only in numerous animal models, but in humans as well. For example, severalclinical trials have reported that kidney transplantation accompanied by a previous HSCT from the same donor was tolerated by the recipient'simmune system. We believe that our products could become the major adjunct therapy in any solid organ transplantation to allow tolerance.●Functional selection of cord blood. Stem cells from the cord blood of newborns can be collected immediately after birth and preserved frozen.Currently, the main impediment of HSCT based on stem cells from cord blood is that the amount of cord blood is very limited. In combination withinefficient selection methods, the quantity of the collected stem cells is minimal. Therefore, the treatment is usually limited to children having lowbody mass. Physicians have tried using double cord blood and other methods which have resulted in new immune related adverse effects. Underethical review board approval, we examined more than 150 samples of cord blood and showed that we can achieve approximately 400 times morestem and progenitor cells from any given samples. We believe this may open up the use of cord blood for adult patients in the future.●Stem cell expansion. We already have preliminary indications that our ApoGraft technology platform greatly improves the efficiency of the stemcell expansion process by increasing the initial number of cells that undergoes expansion. Therefore, we believe that companies that currently usestem cell expansion will have a major advantage if our selection process is integrated as the first step in their manufacturing process.●Tissue and organ engineering. One of the objectives of regenerative medicine is to enable the use of stem cells as a reservoir for organ and tissueengineering and, ultimately, transplantation. The goal is that the patient will be able to accept organs or tissues engineered from foreign stem cells.These emerging technologies rely on a sufficient number of stem cells from the donor and the separation of those cells from the donor’s immunesystem in order to avoid rejection. We believe that our functional stem cell selection process can be the optimal solution for such needs.●Mesenchymal stem cells. Develop the use of Fat derived mesenchymal stem cells under FasL treatment for various indications including immunetolerance, orthopedic and dermatocosmetic indications.39Research and DevelopmentOur core technology was originally derived from research conducted by the research group of Dr. Nadir Askenasy. Our research and development activitieshave been focused on additional animal models of a variety of diseases, experiments to determine the mechanism of action of our ApoGraft technology platform, andtoxicology testing. Based on these preclinical programs we have began clinical testing of products based on our ApoGraft technology platform in humans. Duringthe years ended December 31, 2015, 2016 and 2017, we incurred approximately $1.5 million, $2.1 million, $3.3 million respectively in expenses on companysponsoredresearch and development activities.Raw Materials and SuppliersAlthough most raw materials for the ApoGraft technology platform is readily obtainable from multiple sources, we know of only two manufacturers of FasL(the apoptotis inducing signal), Oncology Ventures A/S, or Oncology Ventures, and Adipogen International. We are currently using FasL from Oncology Venturesand believe that we have a sufficient supply of FasL for our ongoing Phase I/II trial however we will need to obtain an additional supply of FaSL for future plannedclinical trials. We have experienced delays in the supply of FasL for our planned second human ApoGraft trial and are currently establishing a manufacturingprocess through a contract manufacturer to supply us with sufficient FasL for future planned clinical trials. If our current supplier of FasL or any other suppliersuffers a major natural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to us, then this could result in further delays in ourclinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified. With respect to other raw materialsfor the ApoGraft technology platform, although multiple sources of supply exist, it could be expensive and take a significant amount of time to arrange for alternativesuppliers.If our manufacturers or we are unable to purchase any key materials after regulatory approval has been obtained for our product candidates, the commerciallaunch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of ourproduct candidates.ManufacturingWe do not own or operate, and currently have no current plans to establish, any manufacturing facilities. We rely on thirdparty outsourcing arrangementsfor our ApoTainer selection kits that we are developing as well as other preclinical testing activities. For clinical testing purposes, we intend to rely on thirdpartyoutsourcing arrangements as well. Upon completion of development, we may either continue to rely on thirdparty outsourcing arrangements or build amanufacturing facility either on our own or together with a strategic partner. We are currently working with Entegris to jointly develop the polymer film that will beused for the manufacturing of the ApoTainer selection kit and may engage Entegris in the future to manufacture the ApoTainer selection kits for clinical and/orcommercial purposes.CompetitionThe field of regenerative medicine is expanding rapidly, in large part through the development of cellbased therapies and/or devices designed to isolatecells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device andbiotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. Most regenerative medicineefforts involve sourcing adult stem and regenerative cells from tissues such as bone marrow, placental tissue, umbilical cord and peripheral blood. However, agrowing number of companies are using adipose tissue as a cell source.With the growing number of companies working in the cell therapy field, we, either now or in the future, will be forced to compete across several areas,including equity and capital, clinical trial sites, enrollment of patients in clinical trials, corporate partnerships, skilled and experienced personnel and commercialmarket share. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We cannot with anyaccuracy forecast when or if these companies are likely to bring cell therapies to market for indications such as bone marrow transplants which we are also pursuing.40There are currently two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi, which dominates thehematopoietic stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as Tcells from the biological sample (negative selection by monoclonal activity against Tcell receptor α&β), resulting in the enrichment of stem and progenitor cells. Thesecond is Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose derived regenerative cells, or ADRCs,by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. While Miltenyi is usingmorphological markers of stem cells to enrich the stem cell population, Cytori is using the physical properties of cells (in general) through centrifugal force forseparation. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population ofcells.In addition, since we are developing our ApoTainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companiesdeveloping treatments for GvHD. These companies include Athersys, Inc., or Athersys, Bellicum Pharmaceuticals Inc., Erytech Pharma SA, Fate Therapeutics Inc.,Fortress Biotech Inc., (formerly Coronado Biosciences), Gamida Cell Ltd., or Gamida, Kiadis Pharma N.V., or Kiadis, MEDIPOST Co., Ltd., Mesoblast Ltd., orMesoblast, MolMed S.p.A., and Pluristem Therapeutics Inc., or Pluristem.In the general area of cellbased therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom arespecialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection including, amongothers, Advanced Cell Technology, Inc., Arteriocyte Medical Systems Inc., Athersys, Baxter International Inc., Bioheart Inc., Caladarius Biosciences Inc., NuoTherapeutics, Inc., Fibrocell Science Inc., Gamida, Genzyme Corporation, Harvest Technologies Corporation, In vivo Therapeutics Holdings Corp., Johnson &Johnson, Kiadis, Mesoblast, Neuralstem Inc., Ocata Therapeutics Inc., Osiris Therapeutics, Inc., Pluristem, Tigenix NV, and others. We believe, however, that manyof these companies have the potential to become customers in the future of our ApoGraft technology platform in order to improve and enhance their inhouseprocesses.Intellectual PropertyOur success depends in large part on our ability to protect our proprietary technology and to operate without infringing on the proprietary rights of thirdparties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and otheragreements, to establish and protect our proprietary rights. Our success also depends, in part, on our ability to avoid infringing patents issued to others. If we werejudicially determined to be infringing on any thirdparty patent, we could be required to pay damages, alter our products or processes, obtain licenses or ceasecertain activities.To protect our proprietary functional cell selection technology platform and other scientific discoveries, we have a wide family of patents and patentapplications. These patents cover other stem cell related inventions but mainly our functional selection methodology, products and methods of use. The fullpublished domain is further described below:●A patent entitled “Method of Inducing Immune Tolerance via Blood/Lymph FlowRestricted Bone Marrow Transplantation” was granted in theUnited States. If the appropriate maintenance fees are paid, the patent is expected to expire in April 2024 (including a 571 day patent termadjustment granted by the USPTO).●A patent entitled “Methods of Selecting Stem Cells and Uses Thereof” was granted in the United States, Canada, Israel, India and Europe(validated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom). If the appropriate maintenance fees are paid,the patent is expected to expire in May 2027 in Israel, India and Europe and in September 2029 in the United States (including an 829 day patentterm adjustment granted by the USPTO).41●A patent application entitled “Regulatory Immune Cells with Enhanced Targeted Cell Death Effect” was filed as a Patent Cooperation Treaty, orPCT, which entered national phase in the United States, Europe and Israel. A patent was granted in the United States and Europe and wasvalidated in Denmark, France, Germany, Ireland, Netherlands, Switzerland and the United Kingdom. The patent application in Israel is pending. Ifthe appropriate maintenance fees are paid, the issued patents and the patent to be issued on the application in Israel, if issued, are expected toexpire in July, 2031.●A patent application entitled “Devices and Methods for Selecting ApoptosisSignaling Resistant Cells and Uses Thereof” was filed as a PCTapplication and is now in national phase in Australia, Brazil, Canada, China, Europe, India, Japan, Korea, Russia, USA and Israel. A patent wasgranted in the United States and Russia. With respect to the European application, the European Patent Office issued a Communication under Rule71(3) EPC (intent to grant). If the appropriate maintenance fees are paid, these issued patents and the patents to be issued on the pendingapplications, if issued, are expected to expire in March, 2033.●A patent application entitled “Activation of Hematopoietic Progenitors by Pretransplant Exposure to Death Ligands” was filed as a PCTapplication and is now in national phase in Australia, Canada, China, Europe, India, Israel, Japan, Korea, and USA. If patents are issued from theseapplications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in October 2034.●A patent application entitled “Selective Surface for, and Methods of, Selecting a Population of Stem and Progenitor Cells, and Uses Thereof” wasfiled as a PCT application and is now in national phase in Europe and USA. If patents are issued from these applications, and if the appropriatemaintenance fees are paid, these patents are currently expected to expire in 2036.●A patent application entitled “Methods for propagating mesenchymal stem cells (MSC) for use in transplantation” was filed as a PCT applicationin September 2016. National phase applications are due for filing in March and April of 2018. If such national phase applications are filed andpatents are issued from these applications, and if the appropriate maintenance fees are paid, these patents are currently expected to expire in 2036.We cannot assure that any of our pending patent applications will be issued, that we will develop additional proprietary products that are patentable, thatany patents issued to us will provide us with competitive advantages or will not be challenged by any third parties, or that the patents of others will not prevent thecommercialization of products incorporating our technology. Furthermore, we cannot assure that others will not independently develop similar products, duplicateany of our products, or design around our patents. U.S. patent applications are not immediately made public, so we might be surprised by the grant to someone elseof a patent on a technology we are actively using.There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalidor infringing of thirdparty claims. For many of our pending applications, patent interference proceedings may be instituted with the USPTO when more than oneperson files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent. At the completion of theinterference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interferenceproceedings are complex and highly contested, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect toany of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding is unfavorable to us,the patent could be issued to a competitor rather than to us. Third parties can file postgrant proceedings in the USPTO, seeking to have issued patent invalidated,within nine months of issuance. This means that patents undergoing postgrant proceedings may be lost, or some or all claims may require amendment orcancellation, if the outcome of the proceedings is unfavorable to us. Postgrant proceedings are complex and could result in a reduction or loss of patent rights.42There is uncertainty in the patent laws within and outside the United States and Israel as these are undergoing constant review and revisions throughlegislation and through courtmade law. The laws of some countries may not sufficiently protect our proprietary rights. Third parties may attempt to oppose theissuance of patents to us by initiating opposition proceedings or institute proceedings to revoke the patents. Opposition or revocation proceedings against any ofour patent application in one country could have an adverse effect on our corresponding issued patents or pending application in another country, e.g. in theUnited States or Israel. It may be necessary or useful for us to participate in proceedings intended to challenge and test the validity of our patents or ourcompetitors’ patents that have been issued in the United States, Israel and in many other jurisdictions. This could result in substantial costs, divert our efforts andattention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.In addition to patent protection, we rely on unpatented trade secrets and proprietary technological expertise. We cannot assure you that others will notindependently develop or otherwise acquire substantially equivalent techniques, somehow gain access to our trade secrets and proprietary technological expertiseor disclose such trade secrets, or that we can ultimately protect our rights to such unpatented trade secrets and proprietary technological expertise. We rely, in part,on confidentiality agreements with our marketing partners, employees, advisors, vendors and consultants to protect our trade secrets and proprietary technologicalexpertise. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our unpatented trade secretsand proprietary technological expertise will not otherwise become known or be independently discovered by competitors.Environmental MattersWe are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewaterdischarges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites.We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safetylaws and regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect onus. The operation of our testing facilities, however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are requiredto comply with new or more stringent environmental or health and safety laws, regulations or requirements.Government RegulationAny products we may develop and our research and development activities are subject to stringent government regulation. In the United States, theseregulations include the Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations that govern the clinical and preclinicaltesting, manufacture, safety, effectiveness, approval, labeling, distribution, sale, import, export, storage, recordkeeping, reporting, advertising, and promotion of ourproducts. Product development and approval within this regulatory framework, if successful, will take many years and involve the expenditure of substantialresources. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDA’s and other health authorities’ delay inapproving or refusal to approve a product. Violations of regulatory requirements also may result in enforcement actions.We are currently in the early clinical development stage and none of our products have been approved for sale in any market.United States Regulatory RequirementsRegulation of Combination ProductsThe FDA has specified a definition for the term “combination product,” which includes: (1) a product comprised of two or more regulated components, e.g.,drug/device, biologic/device, drug/biologic, or drug/device/biologic, that are physically, chemically, or otherwise combined or mixed and produced as a single entity;(2) two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, orbiological and drug products; (3) a drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling isintended for use only with an approved individually specified drug, device, or biological product where both are required to achieve the intended use, indication, oreffect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,dosage form, strength, route of administration, or significant change in dose; or (4) any investigational drug, device, or biological product packaged separately thataccording to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required toachieve the intended use, indication, or effect.43The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for BiologicsEvaluation and Research, or CBER, or the Center for Devices and Radiological Health, or CDRH. Different Centers review drug, biologic, or device applications.The FDA is charged with assigning a Center with primary jurisdiction, or a lead Center, for review of a combination product. That determination is based onthe “primary mode of action,” or PMOA, of the combination product. Thus, if the PMOA of a devicebiologic combination product is attributable to the biologicproduct, CBER, which is responsible for premarket review of the biologic product, would have primary jurisdiction for the combination product. If there are twoindependent modes of action, neither of which is subordinate to the other, the FDA makes a determination as to which center to assign the product based onconsistency with other combination products raising similar types of safety and effectiveness questions or to the center with the most expertise in evaluating themost significant safety and effectiveness questions raised by the combination product.The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to theregulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developingguidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review ofcombination products where the jurisdiction is unclear or in dispute.After formally establishing the PMOA through an applicant’s Request for Designation, the Center that regulates that portion of the product that generatesthe PMOA becomes the lead evaluator. When evaluating an application, a lead Center may consult other centers but still retain complete reviewing authority, or itmay collaborate with another Center, wherein the lead Center assigns concurrent review of a specific section of the application to another Center, delegating itsreview authority for that section.Typically, the FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretionto require separate applications to more than one Center. One reason to submit multiple evaluations is if the applicant wishes to receive some benefit that accruesonly from approval under a particular type of application, like new drug product or orphan drug exclusivity. If multiple applications are submitted, each may beevaluated by a different lead Center. When submitting multiple applications, the applicant may be subject to the payment of two user fees, but a waiver of such feesmay be obtained under certain limited circumstances.The FDA may subject a combination product to two or more sets of legal authorities, e.g., drug/device, biologic/device, drug/biologic drug, but it has theauthority to deem one set of legal authorities sufficient. FDA’s standard of review for a combination products application and the applicable legal authority orauthorities will depend on a casebycase basis evaluation of the scientific and technical issues and risk profile relevant to a combination product and its constituentparts. Because of the breadth and complexity of this analysis in each case, no single regulatory paradigm is appropriate for all combination products.After receiving FDA approval or clearance, an approved or cleared product must comply with postmarket safety reporting requirements applicable to theproduct based on the application type under which it received marketing authorization. In the case of current good manufacturing practices, or cGMP, the applicantmay take one of two approaches: (1) complying with cGMP for each constituent part, or (2) a streamlined approach specific to combination products, subject tocertain limitations.44We believe the FDA will classify our ApoTainer stem cell selection kits as a combination product subject to the primary jurisdiction of the CBER and thesecondary jurisdiction of CDRH. As such, we plan to bring our ApoTainer selection kits to market for HSCT as a combination product subject to the primaryjurisdiction of the CBER and will submit a single application to CBER. Accordingly, we expect the approval process of our ApoTainer selection kits to be moreburdensome and lengthy than if our ApoTainer selection kits were classified as a combination product subject to the primary jurisdiction of the CDRH. Because weanticipate coordination between CBER and CDRH in their review of our ApoTainer stem cell selection kit product application, and because the review and approvalprocess may draw in requirements from each regulatory paradigm, we discuss FDA’s general approval process as well as specific requirements for biologics anddevices approvals in the U.S., respectively, below.FDA Approval ProcessThe FDA extensively regulates, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,storage, recordkeeping, promotion, advertising, distribution, marketing and import and export of medical products. The FDA governs the following activities that wemay perform or that may be performed on our behalf, to ensure that the medical products we may in the future manufacture, promote and distribute domestically orexport internationally are safe and effective for their intended uses:●product design, preclinical and clinical development and manufacture;●product premarket clearance and approval;●product safety, testing, labeling and storage;●recordkeeping procedures;●product marketing, sales and distribution; and●postmarketing surveillance, complaint handling and adverse event reporting, including reporting of deaths, serious injuries, malfunctions or otherdeviations; and●recall of products, including repairs or remediation.A new biologic must be approved by the FDA through the biologics license application, or BLA, process before it may be legally marketed in the U.S. Theanimal and other nonclinical data and the results of human clinical trials performed under an Investigational New Drug, or IND, application and under similar foreignapplications will become part of the BLA. A new medical device must be cleared or approved by FDA through the premarket approval (PMA) or 510(k) clearance. Formedical devices that require a PMA, clinical studies performed under an Investigation Device Exemption, or IDE, will become part of a PMA for a medical device. Acombination biologic/device may be subject to standards of review for both CBER and CDRH. Therefore, we discuss the respective regulatory approval pathwaysfor both biologics and medical devices.In the U.S., the FDA regulates biologics under the Public Health Service Act, or PHSA, and implementing regulations and medical devices under theFederal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, respectively. The process of obtaining regulatory approvals and the subsequentcompliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure tocomply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of governmentcontracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The processrequired by the FDA before a biologic or medical device may be marketed in the U.S. generally involves the following, though a more specific discussion ofregulatory requirements for biologics and medical devices follows:●completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, or otherapplicable regulations;●submission to the FDA of an IND or IDE which must become effective before human clinical trials may begin;45●Approval by an institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated;performance of adequate and wellcontrolled human clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacyof the proposed drug or device for its intended use;●preparation and submission of a BLA or PMA to the FDA;●satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance withcurrent good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,strength, quality and purity; andsatisfactory completion of any FDA audits of the clinical study sites to assure compliance with GCP, and the integrity of clinical data in support ofthe BLA or PMA;●FDA review and approval of the BLA or PMA.Once a biologic product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations ofproduct chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the firstphase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacyevaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA, within the 30day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or noncompliance.Once a medical device product requiring a PMA is identified for development, it enters the feasibility study stage. For significant risk devices, includingdevices that devices that are substantially important in diagnosing, curing, mitigating or treating disease or in preventing impairment to human health, sponsorsmust submit an investigational plan to FDA as part of the IDE. The IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, withinthe 30day time period, places the clinical trial on a clinical hold. An IDE sponsor typically must submit results of feasibility studies to FDA to receive approval toproceed with a pivotal study. A pivotal study is generally intended as the primary clinical support for a marketing application.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. They must beconducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteriato be evaluated. Each protocol must be submitted to the FDA as part of the IND or IDE, and progress reports detailing the results of the clinical trials must besubmitted at least annually. In addition, timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Aninstitutional review board, or IRB, responsible for the research conducted at each institution participating in the clinical trial must review and approve each protocolbefore a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trialsubject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.Human clinical trials for biologics are typically conducted in three sequential phases that may overlap or be combined:●Phase I: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or lifethreatening diseases, such as cancer, especially when theproduct may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.46●Phase II: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.●Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall riskbenefit ratio of the product candidate andprovide, if appropriate, an adequate basis for product labeling.Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of aninstitutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including, but not limited to, those relating to goodclinical practices. To conduct a clinical trial, we also are required to obtain the patient’s informed consent in a form and substance that complies with both FDArequirements and state and federal privacy and human subject protection regulations.The FDA, the IRB, or we could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh theanticipated benefits or a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminateapproval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associatedwith unexpected serious harm to patients. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. Even if atrial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtainFDA clearance or approval to market the product in the United States. Similarly, in Europe, the clinical study must be approved by a local ethics committee and insome cases, including studies with highrisk devices, by the ministry of health in the applicable country.During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tosubmission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can providean opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reachagreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans forthe pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do thesame for planning for their pivotal trial or trials for a medical device.Clinical research clinical research involving the transplantation of cells or test articles derived from human fetal tissue into human recipients is subject toadditional U.S. Department of Health and Human Services Office for Human Research Protections requirements. Because our ApoTainer stem cell selection kit usesautologous stem cell treatments, stem cells that are extracted of the patient and transplanted to the same patient, we believe these requirements do not apply to us.Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry andphysical characteristics of a biologic and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. Forbiologics, the manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, themanufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selectedand tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Beforeapproving a BLA or PMA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributescannot be precisely defined.47Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain stateagencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in themanufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded underthe FDCA.Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMP and other laws.Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection bythe FDA may lead to a product being deemed to be adulterated.There are also specific approval requirements for both biologics and medical device products, respectively. Biologics and medical devices are also eligiblefor different forms of exclusivities and priority review, and combination products may be eligible for both. We discuss both regulatory paradigms below, as ourApoTainer stem cell selection kits product will implicate elements of each, largely at CBER’s discretion to involve CDRH in the review and approval process.U.S. Review and Approval of BiologicsIn order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that providessufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The application includes all relevant dataavailable from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relatingto the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from companysponsored clinical trials intended totest the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketingapproval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of theFDA.The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conductedon the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of a BLA requesting approval to market theproduct. The submission of a BLA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances. The FDAinitially reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA generallycompletes this preliminary review within 60 calendar days. The FDA may request additional information rather than accept a BLA for filing. In this event, the BLAmust be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an indepth substantive review. FDA may refer the BLA to an advisory committee for review, evaluation and recommendationas to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but itgenerally follows such recommendations. The approval process is lengthy and often difficult, and the FDA may refuse to approve a BLA if the applicable regulatorycriteria are not satisfied or may require additional clinical or other data and information. Even if such data and information are submitted, the FDA may ultimatelydecide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differentlythan we interpret the same data. FDA reviews a BLA to determine, among other things whether the product is safe, pure and potent and the facility in which it ismanufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDAwill inspect the facility or facilities where the product is manufactured. The FDA may issue a complete response letter, which may require additional clinical or otherdata or impose other conditions that must be met in order to secure final approval of the BLA, or an approval letter following satisfactory completion of all aspectsof the review process.48BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an original BLA will be 10 months from the datethat the BLA is filed. A biologic representing a significant improvement in treatment, prevention or diagnosis of disease may receive a priority review of six months.Priority review does not change the standards for approval, but may expedite the approval process.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing whichinvolves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval, and may require testing and surveillance programs to monitorthe safety of approved products which have been commercialized.The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act,or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosingregimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received adeferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatricsubpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that thebiologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected beforepediatric studies can begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to submit a required pediatric assessment withinspecified deadlines or fails to submit a timely request for approval of a pediatric formulation, if required.Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create an abbreviated approval pathway for two types of“generic” biologics — biosimilars and interchangeable biologic products, and provides for a twelveyear exclusivity period for the first approved biological product,or reference product, against which a biosimilar or interchangeable application is evaluated; however if pediatric studies are performed and accepted by the FDA,the twelveyear exclusivity period will be extended for an additional six months. A biosimilar product is defined as one that is highly similar to a reference productnotwithstanding minor differences in clinically inactive components and for which there are no clinically meaningful differences between the biological product andthe reference product in terms of the safety, purity and potency of the product. An interchangeable product is a biosimilar product that may be substituted for thereference product without the intervention of the health care provider who prescribed the reference product.The biosimilar applicant must demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product ishighly similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate safety, purity and potency in one ormore appropriate conditions of use for which the reference product is approved. In addition, the applicant must show that the biosimilar and reference productshave the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meetstandards designed to assure product safety, purity and potency.U.S. Review and Approval of Medical DevicesUnless an exemption applies, medical device commercially distributed in the United States require either premarket notification, or 510(k) clearance, orapproval of a premarket approval, or PMA, application from the FDA. While we anticipate CBER will be the lead Center in reviewing our product application,CDRH’s review standards will likely apply to significant portions of the application.49The FDA classifies medical devices into one of three classes. Class I devices, considered to have the lowest risk, are those for which safety and effectivenesscan be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’sQuality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and nonmisleadinglabeling, advertising, and promotional materials (General Controls). Class II devices are subject to the FDA’s General Controls, and any other special controls asdeemed necessary by the FDA to ensure the safety and effectiveness of the device (Special Controls). Manufacturers of most Class II and some Class I devices arerequired to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. This processis generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as lifesustaining, lifesupporting or implantable devices, ordevices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III,requiring approval of a PMA. The submission of a 510(k) or PMA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limitedcircumstances.510(k) Clearance Pathway for Medical DevicesWhen a 510(k) clearance is required, an applicant is required to submit a 510(k) application demonstrating that our proposed device is substantiallyequivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for thesubmission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As apractical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantialequivalence.Once filed, the FDA has 90 days in which to review the 510(k) application and respond. Typically, the FDA’s response after reviewing a 510(k) application isa request for additional data or clarification. Depending on the complexity of the application and the amount of data required, the process may be lengthened byseveral months or more. If additional data, including clinical data, are needed to support our claims, the 510(k) application process may be significantly lengthened.If the FDA issues an order declaring the device to be Not Substantially Equivalent, or NSE, the device is placed into a Class III or PMA category. At thattime, a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA believes the device issufficiently safe so that no PMA should be required. The request must be in writing and sent within 30 days from the receipt of the NSE determination. The requestshould include a description of the device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Thede novo process has a 60day review period. If the FDA classifies the device into Class II, a company will then receive an approval order to market the device. Thisdevice type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in theClass III category, the device cannot be marketed until the company has obtained an approved PMA.Any modification to a 510(k)cleared device that would constitute a major change in its intended use, or any change that could significantly affect thesafety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA if the change raises complex or novelscientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k)submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes didnot require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or PMA approvalis obtained. If the FDA requires us to seek 510(k) clearance or PMA approval for any modifications, we may be required to cease marketing and/or recall the modifieddevice, if already in distribution, until 510(k) clearance or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.Premarket Approval (PMA) Pathway for Medical DevicesWhile we believe that the medical device component of our ApoTainer stem cell selection kits will be subject to the 510(k) clearance pathway, FDA couldevaluate our product under the PMA pathway if it believes the device component raises sufficiently complex or novel scientific issues.50A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process, or is not otherwise exempt from the FDA’spremarket clearance and approval requirements. A PMA application must generally be supported by extensive data, including, but not limited to, technical,preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. Duringthe review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts fromoutside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDAmay or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a preapproval inspection of our or our thirdparty manufacturers’ orsuppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approvalbe met, such as conducting a postmarket clinical trial.New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types ofmodifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type ofinformation as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and maynot require as extensive clinical data or the convening of an advisory panel.Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials generally require anapplication for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless theproduct is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for seriousrisk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing,mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.Breakthrough Device DesignationThe FDA grants Breakthrough expedite development, assessment and review of medical devices that “provide for more effective treatment or diagnosis oflifethreatening or irreversibly debilitating human disease or conditions; and that represent breakthrough technologies; for which no approved or clearedalternatives exist; that offer significant advantages over existing approved or cleared alternatives, or the availability of which is in the best interest of patients.”This status confers a number of benefits on the development path of medical devices. These include:●a dedicated FDA team, including senior management engagement, to facilitate development of the device●a defined process for resolving disputes that may arise between the sponsor and FDA●a commitment to interactive and timely communication between FDA and the sponsor●increased flexibility in clinical study design●options for data collection in the postmarket setting, in place of a full clinical study prior to approval●priority review status, meaning that a sponsor’s submissions will be placed at the top of the relevant review queue and receive additional FDAresources as needed●expedited review and potential deferral of manufacturing and quality systems compliance audits●advance disclosure to the sponsor of the topics of any consultation between the FDA and external experts or an advisory committee●an opportunity for the sponsor to recommend external experts for such consultations●assignment of FDA staff to address questions by institutional review committees concerning investigational use of the medical device●any additional steps FDA deems appropriate to expedite the development and review of the medical device.We plan to apply for a Breakthrough Designation for the container component of our ApoTainer selection kit.51Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of our product, some of our U.S. patents may be eligible for limited patent termextension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the HatchWaxman Amendments. The HatchWaxmanAmendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during product developmentand the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’sapproval date. The patent term restoration period is generally onehalf the time between the effective date of an IND, and the submission date of a BLA, plus thetime between the submission date of a BLA and the approval of that application, except that the period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug may be extended, and the extension must be applied for prior to expiration of the patent. TheUnited States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.Pediatric exclusivity is another type of marketing exclusivity available in the U.S. FDASIA made permanent the Best Pharmaceuticals for Children Act, orBPCA, which provides, under certain circumstances, for an additional six months of marketing exclusivity if a sponsor conducts clinical trials in children in responseto a written request from the FDA, or a Written Request. If the Written Request does not include studies in neonates, the FDA is required to include its rationale fornot requesting those studies. The FDA may request studies on approved or unapproved indications in separate Written Requests. The issuance of a WrittenRequest does not require the sponsor to undertake the described studies.Orphan Drug DesignationWe have received Orphan Drug Designation from FDA for our ApoGraft technology for the prevention of acute and chronic graft versus host disease(GvHD) in transplant patients. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in theU.S. for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or shorten theduration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the diseasefor which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to marketthe same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of oneof our product candidates for seven years if a competitor obtains approval of the same drug, for the same designated orphan indication or if our product candidate isdetermined to be contained within the competitor’s product for the same indication or disease.The FDA also administers a clinical research grants program, whereby researchers may compete for funding to conduct clinical trials to support theapproval of drugs, biologics, medical devices, and medical foods for rare diseases and conditions. A product does not have to be designated as an orphan drug tobe eligible for the grant program. An application for an orphan grant should propose one discrete clinical study to facilitate FDA approval of the product for a raredisease or condition. The study may address an unapproved new product or an unapproved new use for a product already on the market.PostApproval Regulation of Biologics and Medical DevicesAfter a product is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, adverse eventreporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in whichour product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirementsinclude:●product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;52●cGMP or QSR, which requires manufacturers, including thirdparty manufacturers, to follow stringent design, validation, testing, control,documentation and other quality assurance procedures during all aspects of the design and manufacturing process;●labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or offlabel use or indication;●clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended useof one of our approved medical products;●notice or approval of product or manufacturing process modifications or deviations that affect the safety or effectiveness of one of our approvedmedical products;●postapproval restrictions or conditions, including postapproval study commitments;●postmarket surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectivenessdata for the medical product;●the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is inviolation of governing laws and regulations;●regulations pertaining to voluntary recalls; and●notices of corrections or removals.A biologic product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the productbefore it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocolshowing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may inaddition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory researchrelated to the safety, purity, potency and effectiveness of pharmaceutical products.Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the U.S. Federal Trade Commission, orFTC, and by state regulatory and enforcement authorities. Promotional activities for FDAregulated products of other companies have been the subject ofenforcement action brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal U.S. Lanham Act and similarstate laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countriesoutside the United States, which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutespromotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcementactions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials toconstitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting falseclaims for reimbursement.Failure by us or by our thirdparty manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by theFDA or other regulatory authorities, which may result in sanctions including, but not limited to:●untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;●customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;●operating restrictions or partial suspension or total shutdown of production;53●refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;●withdrawing 510(k) clearances or PMA approvals that have already been granted;●refusing to grant export approval for our products; or●criminal prosecution.Human Cells, Tissues, and Cellular and TissueBased Products RegulationUnder Section 361 of the PHSA, the FDA issued specific regulations governing the use of human cells, tissues and cellular and tissuebased products, orHCT/Ps, in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or Part 1271, the FDA established a unified registration and listing systemfor establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissuepractices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures toprevent the introduction, transmission, and spread of communicable diseases.The HCT/P regulations strictly constrain the types of products that may be regulated solely under these regulations. Factors considered include the degreeof manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or nontissue components,and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissuebased products have beenonly minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on orhave any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt andimplement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug,biological product, or medical device rather than an HCT/P.Management believes that Part 1271 requirements do not currently apply to us because we are not currently investigating, marketing or selling cellulartherapy products. If we were to change our business operations in the future, the FDA requirements that apply to us may also change and we would we wouldpotentially need to expend significant resources to comply with these requirements.Federal Regulation of Clinical LaboratoriesThe Clinical Laboratory Improvement Amendments (“CLIA”) extends federal oversight to clinical laboratories that examine or conduct testing on materialsderived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of disease or for the assessment of the health ofhuman beings. CLIA requirements apply to those laboratories that handle biological matter. CLIA requires that these laboratories be certified by the government,satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to biennial inspections, and remit fees. The sanctions for failure tocomply with CLIA include suspension, revocation, or limitation of a laboratory’s CLIA certificate necessary to conduct business, fines, or criminal penalties.Additionally, CLIA certification may sometimes be needed when an entity desires to obtain accreditation, certification, or license from nongovernment entities forcord blood collection, storage, and processing. However, to the extent that any of our activities require CLIA certification, we intend to obtain and maintain suchcertification and/or licensure.Coverage, Pricing and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any products for which we obtain regulatory approval. Sales of any of ourproducts, if approved, will depend, in part, on the extent to which the costs of the products will be covered by thirdparty payors, including government healthprograms such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will providecoverage for a medical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the medical product oncecoverage is approved. Thirdparty payors may limit coverage to medical drug products on an approved list, or formulary, which might not include all of the approvedproducts for a particular indication.54In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the medical necessity and costeffectiveness of the product, in addition to the costs required to obtain FDA or other comparableregulatory approvals. Our products may not be considered medically necessary or costeffective. A payor's decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Thirdparty reimbursement may not be sufficient to enable us to maintain price levels high enoughto realize an appropriate return on our investment in product development.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of medical products have been a focusin this effort. Thirdparty payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and costeffectiveness of medical products and services, in addition to their safety and efficacy. If these thirdparty payors do not consider our products to be costeffectivecompared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not besufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest inimplementing cost containment programs to limit the growth of governmentpaid health care costs, including price controls, restrictions on reimbursement andrequirements for substitution of generic products for branded prescription medical products. Adoption of such controls and measures, and tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and couldadversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after areimbursement price has been agreed. Some countries may require the completion of additional studies that compare the costeffectiveness of a particular productcandidate to currently available therapies. For example, the European Union (EU) provides options for its member states to restrict the range of drug products forwhich their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States mayapprove a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug producton the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure onhealth care costs in general, particularly prescription medical products, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. In addition, in some countries, crossborder imports from lowpriced markets exert competitive pressure that may reduce pricing within a country.There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricingarrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and thirdparty payors fail toprovide adequate coverage and reimbursement. In addition, an increasing emphasis on managed care in the United States has increased and we expect will continueto increase the pressure on drug pricing. Coverage policies, thirdparty reimbursement rates and drug pricing regulation may change at any time. In particular, thePatient Protection and Affordable Care Act was enacted in the United States in March 2010 and contains provisions that may reduce the profitability of medicalproducts, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.55AntiKickback and False Claims LawsIn addition to FDA restrictions on marketing of medical products, several other types of state and federal laws have been applied to restrict certainmarketing practices in the medical product industry in recent years. These laws include antikickback statutes and false claims statutes. The federal AntiKickbackStatute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between medical product manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Violations of the AKS are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion fromparticipation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activitiesfrom prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induceprescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.The Federal False Claims Act, or FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government toset Medicare and Medicaid reimbursement rates, and for allegedly providing free products to customers with the expectation that the customers would bill federalprograms for the product. In addition, certain marketing practices, including offlabel promotion, may also violate false claims laws. The majority of states also havestatutes or regulations similar to the federal antikickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other stateprograms, or, in several states, apply regardless of the payor.Other RegulationsWe may from time to time become subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory andmanufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, microorganisms and various radioactive compounds used in connection with our research and development activities. These laws include, but are not limited to, the U.S.Occupational Safety and Health Act, the U.S. Toxic Test Substances Control Act and the U.S. Resource Conservation and Recovery Act. Although we believe thatour safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, there can be noassurances that accidental contamination or injury to employees and third parties from these materials will not occur.Foreign Regulatory RequirementsInternational sales of medical products are subject to foreign government regulations, which vary substantially from country to country. The time requiredto obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.In order to conduct clinical testing on humans in the State of Israel, special authorization must first be obtained from the ethics committee and generalmanager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjectsimplemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation.These regulations require authorization by the institutional ethics committee and general manager as well as from the Israeli Ministry of Health, except in certaincircumstances, and in the case of genetic trials, special fertility trials and complex clinical trials, an additional authorization of the Ministry of Health’s overseeingethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project todetermine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for therights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion ofour clinical studies in Israel, we are required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conductour clinical trials, and in most cases, from the Israeli Ministry of Health.56In the EU, the regulatory environment depends on the regulatory status of product. At this point, it is likely that the ApoTainer selection kit would qualifyas a medical device in the EU. However, the substance used in the ApoTainer may qualify as a pharmaceutical product. The ApoTainer selection kit would have toundergo a conformity assessment procedure as a medical devices and the substance would have to obtain a marketing authorization as a drug. It is also possiblethat treatment using the ApoTainer will be subject to further regulatory requirements. In particular, it is possible that the stem cell treatment itself may be consideredthe production of a drug and, therefore, would require a manufacturing authorization according to Dir. 2001/83/EC. Furthermore, the use of the ApoTainer selectionkit may be subject to Member States’ laws on transplantation.With regard to medical devices, the current legal regime is based on the MDD and its implementation in the Member States as well as several guidancedocuments and regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU Member State has implementedlegislation applying these directives and standards at a national level. Other countries such as Switzerland have voluntarily adopted laws and regulations that mirrorthose of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant Member State applying the applicable EUdirective are entitled to bear a CE mark and, accordingly, can be distributed throughout EU Member States as well as in other countries, e.g., Switzerland and Israel,that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may beClass I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of selfassessment by the manufacturer of the safety and performance of thedevice, and a thirdparty assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a privatecommercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a devicecomplies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer tocommercially distribute the device throughout the EU. In addition, compliance with ISO 13485, issued by the International Organization for Standardization, amongother standards establishes the presumption of conformity with the essential requirements for CE marking. Certification to the ISO 13485 standard demonstrates thepresence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devicesand the design, development and provision of related services. In 2017, the new Regulation (EU) No. 745/2017 on medical devices (the Medical Device Regulation, orMDR) has been published and will enter into force three years later, i.e., in 2020. The MDR will result in several medical devices being classified in higher risk classesand therefore face elevated regulatory requirements. In addition, the MDR will generally elevate regulatory requirements to medical devices. As a result, it is likelythat it will become more difficult to market medical devices and costs incurred for clinical evaluation, conformity assessment and post marketing surveillance willincrease.If one or more of our current or future products would have the status of a drug under the law of the EU or one or more of its Member States, regulatoryrequirements for such product(s) would be significantly higher. In particular, a drug can only be placed on the market if it has been authorized by the competentregulatory authority either under the EU centralized procedure, the decentralized or mutual recognition procedure or under a member State’s national procedure.Marketing authorizations for drugs under all of the different authorization procedures are expensive and time consuming.Even if the ApoGraft platform and/or the ApoTainer is considered a medical device, it is possible that the actions performed by the products may beconsidered manufacture of a drug. While HSCT is considered to be subject to regulatory requirements for medicinal products (drugs) in the EU, it is possible HSCTis also considered to be an advanced therapy medicinal product (ATMP), subject to even stricter regulations. With regard to the most basic version of HSCT, theEuropean Medicines Agency, or EMA, has issued an opinion stating that it regarded these treatments as exempt from drug and ATMP regulations. This basic HSCTinvolves the extraction of adipose stem cells from a patient’s subcutaneous area and their transplantation in the subcutaneous area elsewhere in the body of thesame patient, if the treatment is performed in one doctor visit, the cells have the same function where they are extracted as where they are transplanted, and they arenot treated in any way between extraction and transplantation. This opinion does not apply to stem cell treatments that deviate from this basic version in one orseveral aspects. Consequently, other HSCT may qualify as drug treatments or as tissue preparations and a market authorization or manufacturing approval may berequired. If there is doubt as to whether a stem cell treatment is considered a drug or tissue preparation, it is possible to obtain a statement with regard to theproduct status from the EMA Committee for Advanced Therapies (CAT). Whether EMA CAT would qualify a HSCT as a drug and/or an ATMP depends on severalaspects, including the question whether the use of the stem cells is homologous and whether or not the stem cells have been substantially manipulated betweentheir extraction and their transplantation. Furthermore, the treatment may be subject to EU laws on human tissues including Dir. 2004/23/EC setting standardsof quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells and related legalframework on EU and/or Member State level.57However, even if EMA CAT does not consider the treatment a drug and/or an ATMP treatment, it is possible that competent authorities in the MemberStates nevertheless qualify the treatment as a drug and/or an ATMP and make its performance subject to a marketing authorization and/or manufacturingauthorization on their territory.Sales and MarketingDuring 2017, we launched a business development campaign. We believe that interim results from our ongoing Phase I/II study will help validate ourplatform technology and qualify our technology for out licensing to companies interested in improving their manufacturing process of adult stemcell basedproducts. To address these plans we intend to open up business development offices and hire a vice president for business development in United States. Therecruitment of the team and the data from the clinical trials is expected to converge and allow the initiation of series of licenses on a non exclusive basis to variousstem cells based companies.Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below, are not aware of any pending or threatened material legal or administrativeproceedings against us.C.Organizational StructureWe currently have one wholly owned subsidiary, Cellect Biotherapeutics, which is incorporated in the State of Israel.D.Property, Plant and EquipmentOur headquarters are currently located in Kfar Saba, Israel and consist of approximately 4,360 square feet of leased office space under a lease until October14, 2018,In addition, we hold options to extend the lease until October 14, 2020 and until October 14, 2022 and 2024. On October 24, 2017, we leased another 258square feet of office space under a lease until December 31, 2018, with options to extend the lease until October 14, 2022 and until October 14, 2024. We may requireadditional space and facilities as our business expands.ITEM 4A.UNRESOLVED STAFF COMMENTSNone.58ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this annualreport on Form 20F. This discussion and other parts of this annual report on Form 20F contain forwardlooking statements based upon current expectations thatinvolve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forwardlookingstatements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report in Form 20F. We report financialinformation under IFRS as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generallyaccepted accounting principles in the United States.AOperating ResultsTo date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. Asof December 31, 2017, we had an accumulated deficit of NIS 64 million (approximately $18 million). Our financing activities are described below under “FinanceExpense and Income.”Operating ExpensesOur current operating expenses consist of two components – research and development expenses, and general and administrative expenses.Research and Development Expenses, netOur research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration fees,materials, share based payment and other related research and development expenses, net of grants.The following table discloses the breakdown of research and development expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll2,7393,7115,4861,582Subcontractors538534853246Patent registration32640925674R&D related purchases7701,6761,574454Sharebased payment5232531,940560Professional services7461,044651188Other expenses2516297432145,8938,25611,5033,318* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries, professional service fees, director fees, office expenses, taxes and fees, share basedpayment and other general and administrative expenses.59The following table discloses the breakdown of general and administrative expenses:Year ended December 31,2015201620172017NISUSD*(in thousands)Payroll1,0242,9943,076887Professional services1,3672,0743,745942Director fees358318354102Office expense235466449130Sharebased payment7951,2993,444993Other expenses4258171,862675Total4,2047,96812,9303,729* USD presented as convenience translation using December 31, 2017 NIS/USD exchange rate of NIS 3.467.Comparison of the year ended December 31, 2017 to the year ended December 31, 2016 to the year ended December 31, 2015Results of OperationsDecember 31,December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Research and development expenses, net5,8938,25611,5031,5102,1473,318General and administrative expenses4,2047,96812,9301,0772,0723,729Other income(280)(73)Operating loss10,09715,94424,4332,5874,1467,047Finance expense (income), net75(627)3,79119(163)1,094Total comprehensive loss10,17215,31728,2242,6063,9838,141Loss attributable to holders of OrdinaryShares10,17215,31728,2242,6063,9838,141* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Research and Development Expenses, netOur research and development expenses for the year ended December 31, 2017 amounted to NIS 11.5 million (approximately $3.3 million), representing anincrease of NIS 3.2 million (approximately $1.2 million), or 39%, compared to NIS 8.3 million (approximately $2.1 million) for the year ended December 31, 2016. Theincrease was primarily attributable to an increase of NIS 1.7 million (approximately $0.5 million) from share based payment and an increase of salaries and relatedpersonnel expenses in an amount of NIS 1.8 million (approximately $0.5 million) reflecting the growth in our activities resulting from an increase in the number ofemployees engaged in research and development related activities from thirteen to eighteen.Our research and development expenses for the year ended December 31, 2016 amounted to NIS 8.3 million (approximately $2.1 million), representing anincrease of NIS 2.4 million (approximately $0.6 million), or 40%, compared to NIS 5.9 million (approximately $1.5 million) for the year ended December 31, 2015. Theincrease was primarily attributable to an increase of NIS 1.2 million (approximately $0.3 million) from R&D related expenses as part of the preparation for the clinicaltrial and for the lab and an increase of salaries and related personnel expenses in an amount of NIS 1.0 million (approximately $0.26 million) reflecting the growth inthe our activities resulting from an increase in the number of employees engaged in research and development related activities from nine to thirteen.General and Administrative ExpensesOur general and administrative expenses totaled NIS 12.9 million (approximately $3.7 million) for the year ended December 31, 2017, an increase of NIS 4.9million (approximately $1.7 million), or 61%, compared to NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016. The increase resultedprimarily from an increase of NIS 2.2 million (approximately $0.6 million) in share based payment, an increase of NIS 1.2 million (approximately $0.3 million) inprofessional services due to increase in legal and investor and public relations expenses as the company was a Nasdaq company for the all year and an increase ofNIS 1.6 million (approximately $0.5 million) from other expenses which mainly represent the company business development activities.60Our general and administrative expenses totaled NIS 8.0 million (approximately $2.0 million) for the year ended December 31, 2016, an increase of NIS 3.7million (approximately $1.0 million), or 89%, compared to NIS 4.2 million (approximately $1.0 million) for the year ended December 31, 2015. The increase resultedprimarily from an increase of NIS 2.5 million (approximately $0.65 million) in payroll and share based payment reflecting the growth in the company activities resultingfrom an increase in the number of employees and an increase of NIS 0.7 million (approximately $0.18) in professional services due to increase in legal and investorand public relations expenses after our U.S. initial public offering, or IPO.Operating LossAs a result of the foregoing, our operating loss for the year ended December 31, 2017 was NIS 24.4 million (approximately $7.0 million), as compared to anoperating loss of NIS 15.9 million (approximately $4.1 million) for the year ended December 31, 2016, an increase of NIS 8.5 million (approximately $2.9 million), or53%.As a result of the foregoing, our operating loss for the year ended December 31, 2016 was NIS 15.9 million (approximately $4.1 million), as compared to anoperating loss of NIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.8 million (approximately $1.5 million), or58%.Finance Expense and IncomeFinance expense and income mainly consist of bank fees and other transactional costs, changes in the fair value of certain price adjustment mechanisms inwarrants that were issued to investors who participated in certain fund raising rounds, and exchange rate differences.We recognized net financial expenses of NIS 3.8 million (approximately $1.1 million) for the year ended December 31, 2017, compared to net financial incomeof NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016. The change is primarily due to the change in the fair value of the listed warrantsgranted in the IPO in 2016 and to the unregistered warrants granted in our registered direct offering in 2017.We recognized net financial income of NIS 0.6 million (approximately $0.16 million) for the year ended December 31, 2016, compared to net financial expenseof NIS 0.075 million (approximately $0.02 million) for the year ended December 31, 2015. The increase is primarily due to the change in the fair value of the listedwarrant granted in the IPO.Total Comprehensive LossAs a result of the foregoing, our comprehensive loss for the year ended December 31, 2017 was NIS 28.2 million (approximately $8.1 million), as compared toNIS 15.3 million (approximately $4.0 million) for the year ended December 31, 2016, an increase of NIS 12.9 million (approximately $4.1 million), or 84%.As a result of the foregoing, our comprehensive loss for the year ended December 31, 2016 was NIS 15.3 million (approximately $4.0 million), as compared toNIS 10.1 million (approximately $2.6 million) for the year ended December 31, 2015, an increase of NIS 5.2 million (approximately $1.3 million), or 51%.Critical Accounting Policies and EstimateOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reportedexpenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. While our significant accountingpolicies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accountingpolicies are the most critical for fully understanding and evaluating our financial condition and results of operations.61Sharebased payment transactionsFrom time to time we grant to our employees and other service providers remuneration in the form of equitysettled sharebased instruments, such asoptions to purchase ordinary shares. The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grantdate. The fair value is determined using an acceptable option pricing model. As for other service providers, the cost of the transactions is measured at the fair valueof the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equityinstruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award. No expense isrecognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective ofwhether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied. When we change the conditions ofthe award of equitysettled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the totalfair value of the remuneration granted or benefits the other service provider according to the fair value on date of change. Cancellation of the award of equitysettledinstruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately.However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both beaccounted for as a change to the original award, as described above.Option ValuationsThe determination of the grant date fair value of options using an option pricing model (we utilize the BlackScholes model) is affected by estimates andassumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of theoptions, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends, which are estimated as follows:●Volatility. The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparablecompanies on the TASE and on the NASDAQ and benchmarks of related companies.●Expected Term. The expected term of options granted is based upon the contractual life of the options and represents the period of time thatoptions granted are expected to be outstanding.●RiskFree Rate. The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of theoptions.●Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeablefuture. Consequently, we use an expected dividend yield of zero.Impairment of nonfinancial assetsWe evaluate the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that the carrying amount isnot recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pretaxdiscount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for thecashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.62An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount thatwould have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount.The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.Government grantsGovernment grants received from the IsrealU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt as areduction in research and development expenses, as we evaluated that there is reasonable assurance that we will not be required to pay royalties, based on the bestestimate of future sales using the original effective method.IFRS 16, LeasesIn January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an assetfor a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performance oruse (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment foroperating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach, withcertain transition relief whereby restatement of comparative data is not required.63We are currently evaluating the impact of implementing this guidance on our consolidated financial statements. In 2018, we will continue to assess thepotential effect of IFRS 16 on our consolidated financial statements as well as its adoption methodology.Financial LiabilitiesFinancial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according to theirterms at amortized cost using the effective interest method, taking into account directly attributable transaction costs.The warrants were classified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance withIAS 39.Issue of a Unit of SecuritiesThe issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on thefollowing order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities thatare measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each componentpro rata to the amounts determined for each component in the unit.BLiquidity and Capital ResourcesOverviewDuring the year ended December 31, 2017, we funded our operations principally with NIS 47.3 million (approximately $12.7 million) from the issuance ofordinary shares and warrants in 2016 and 2017. As of December 31 2017, we had NIS 27.7 million (approximately $8.0 million) in cash and cash equivalents andmarketable securities.The table below presents our cash flows:Year ended December 31,2015201620172015*2016*2017*(in thousands of NIS)(in thousands of USD)Net cash used in operating activities(7,710)(14,412)(17,770)(1,975)(3,748)(5,126)Net cash provided by (used in) Investingactivities3,175(18,012)10,091814(4,684)2,910Net cash provided by financing activities6,39634,92415,8131,6399,0834,562Net increase in cash and cash equivalents1,7912,3667,4554596152,150* USD presented as convenience translation using year end 2017, 2016, 2015 NIS/USD exchange rate of: NIS 3.467, NIS 3.845 and NIS 3.902, respectively.Operating ActivitiesNet cash used in operating activities was NIS 17.7 million (approximately $5.1 million) for the year ended December 31, 2017, compared with net cash used inoperating activities of approximately NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016.Net cash used in operating activities was NIS 14.4 million (approximately $3.7 million) for the year ended December 31, 2016, compared with net cash used inoperating activities of approximately NIS 7.7 million (approximately $2.0 million) for the year ended December 31, 2015. The increases in such periods are primarilydue to increases in research and development expenses.64Investing ActivitiesNet cash provided by investing activities of NIS 10.1 million (approximately $2.9 million) during 2017 primarily reflects net proceeds from short term depositsand marketable securities.Net cash used in investing activities of NIS 18.0 million (approximately $4.7 million) during 2016 primarily reflects increase in short term deposits.Net cash provided by investing activities of NIS 3.1 million (approximately $0.8 million) during 2015 primarily reflects sales of marketable securitiesmeasured at fair value through profit and loss.Financing ActivitiesNet cash provided by financing activities in the years ended December 31, 2017, 2016 and 2015 consisted of NIS 15.8 million (approximately $4.6 million),NIS 34.9 million (approximately $9.1 million) and NIS 6.4 million (approximately $1.6 million) respectively, of net proceeds, mainly from the issuance of ordinary shares(including ordinary shares represented by ADSs) and warrants.In March 2016, we issued an aggregate of 5,783,437 ordinary shares pursuant to a private placement, at a price of NIS 1.39 (approximately $0.36) per share.In addition, we issued warrants to purchase up to 1,927,801 ordinary shares, which had an exercise price of NIS 2.1 (approximately $0.54) per warrant. The warrantsexpired on March 7, 2018. In August 2016, we issued an aggregate of 1,292,308 ADSs and listed warrants to purchase 1,035,121 ADSs in our IPO, at a price of $6.50 per ADS resulting ingross proceeds of approximately $8.4 million..On September 11, 2017, we sold to certain accredited investors an aggregate of 531,136 ADSs in a registered direct offering at $8.10 per ADS resulting ingross proceeds of approximately $4.3 million. In addition, we issued to the investors unregistered warrants to purchase 265,568 ADSs in a private placement.On January 31, 2018, we sold to certain institutional investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADS resulting ingross proceeds of approximately $4.0 million. In addition, we issued to the investors unregistered warrants to purchase 266,667 ADSs in a private placement.Current OutlookWe have financed our operations to date primarily through proceeds from issuance of our ordinary shares and ordinary shares represented by ADSs. Wehave incurred losses and generated negative cash flows from operations since July 2013. In addition, we have an accumulated deficit of NIS 17.8 million(approximately $5.1 million) at December 31, 2017. We have never generated any revenue from the sale or licensing of our products and we do not expect to generatesignificant revenue within the next year at least.We expect that our existing cash and cash equivalents will be sufficient to fund our current operations until at least the end of the first quarter of 2019. Wehave expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our ApoGrafttechnology platform and our ApoTainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development,manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personneland obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, we expect to incur additional costs associated withoperating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonablyestimate the actual amounts necessary to successfully complete the development and commercialization of our ApoGraft technology platform, ourApoTainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown tous, we require substantial, additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances andlicensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we havesufficient funds for our current or future operating plans. A failure to fund these activities may harm our growth strategy, competitive position, quality complianceand financial condition.65Our future capital requirements depend on many factors, including:●the number and characteristics of products we develop from our ApoGraft technology platform;●the scope, progress, results and costs of researching and developing our ApoGraft technology platform and any future products, and conductingpreclinical and clinical trials;●the timing of, and the costs involved in, obtaining regulatory approvals;●the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;●the cost of manufacturing any future product we successfully commercialize;●our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;●the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcomeof such litigation;●the costs of inlicensing further patents and technologies;●the cost of development of inlicensed technologies;●the timing, receipt and amount of sales of, or royalties on, any future products;●the expenses needed to attract and retain skilled personnel; and●any product liability or other lawsuits related to any future products.Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for our ApoGrafttechnology platform or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our ApoGraft technology platform, our ApoTainer collection kits or any future products. These factors, among others, raise substantial doubt aboutour ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2017expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts andclassifications of assets and liabilities that would result if we were unable to continue as a going concern.5.CResearch and Development, Patents and LicensesSee above, under Item 5A – “Operating Results”.5.DTrend InformationWe are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development orcommercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments orevents that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certaintrends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”665.EOffBalance Sheet ArrangementsWe participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation (BIRD) for the support ofresearch and development activities. We are obligated to pay royalties to BIRD, amounting to 5% of the gross sales of the products and other related revenuesdeveloped from such activities, up to an amount of 150% from the grant received from BIRD by us indexed to the U.S. consumer price index.As of December 31, 2017, we received an aggregate grant of $120,000 from the BIRD Foundation in support of the development and commercialization ofour stem cell selection technology in collaboration with Entegris. Subject to the successful completion of different milestones, we expect to receive additional grantsin the future.5.FContractual ObligationsThe following table summarizes our significant contractual obligations at December 31, 2017:TotalLess than1 year13 years45 yearsMore than5 years(in thousands)Operating Lease Obligations in NIS49240785Operating Lease Obligations in $14211725The operating lease obligations in the foregoing table include our commitments under the lease agreements for our facility in Kfar Saba. See “Item 4.Information on the Company — Property, Plant and Equipment.”ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementDirectors and Senior ManagementWe are managed by a board of directors, which is currently comprised of eight members, and our senior management. Each of our members of seniormanagement is appointed by our board of directors. The table below sets forth our directors and senior management. The business address for each of our directorsand senior management is c/o Cellect Biotechnology Ltd. 23 Hata’as Street, Kfar Saba, Israel 44425.NameAgePositionKasbian Nuriel Chirich59Chairman of the Board of DirectorsDr. Shai Yarkoni59Chief Executive Officer and DirectorEyal Leibovitz56Chief Financial OfficerDr. Ronit BakimerKleiner56Chief Development OfficerAbraham Nahmias(1)(2)(3)62DirectorDr. Ruth Ben Yakar48DirectorYuval Berman(1)(2)(3)51External DirectorMichael Berelowitz(1)73DirectorRuhama Avraham(1)(2)(3)54External DirectorDavid Braun(1)46Director(1)Indicates independent director under NASDAQ rules.(2)Member of our Audit Committee.(3)Member of our Compensation Committee.67Kasbian Nuriel Chirich cofounded our subsidiary, Cellect Biotherapeutics, in 2011 and has served as Chairman of our board of directors since 2013 and ofour subsidiary since inception. Mr. Chirich is an entrepreneur and businessman with extensive financial and business expertise with innovative ventures throughoutEast Africa and Israel. Mr. Chirich is a real estate developer and was previously the founder and general manager of Leadcom Kasbian, which is credited, amongother thing, with establishing the national television of Tanzania and building the infrastructure of two cellular networks in Tanzania. Mr. Chirich serves as theHonorary Consul of Tanzania in Israel.Dr. Shai Yarkoni cofounded our subsidiary, Cellect Biotherapeutics, in 2011, and has served as our Chief Executive Officer and a director since 2013 and ofour subsidiary since inception. Dr. Yarkoni has over 15 years of clinical and management experience in the biopharmaceutical industry. Dr. Yarkoni is a founder ofSne, an Israeli technology transfer company established in 2013. Since 1999, Dr. Yarkoni has also been the Chief Executive Officer and Chairman of GASRBiotechnology, a life sciences consulting and investing firm. From 2009 until 2013, Dr. Yarkoni served as Chief Executive Officer of BioNegev, an internationalinnovation center for biotechnology and life sciences in the Negev region. Prior to that he served as Chief Executive Officer of TargetIn Ltd., a developer oftherapeutic recombinant proteins for cancer treatment and as Chief Technology Officer and Vice President R&D of Collgard Biopharmaceutical, a tissue therapeuticscompany, and was an attending OB/GYN specialist practicing for approximately thirteen years. Dr. Yarkoni holds an M.D and Ph.D from the Hadassah MedicalSchool, Jerusalem, Israel, and is a board certified OB/GYN. Dr. Yarkoni is the author of over 60 scientific papers and inventor of approximately 20 patents.Eyal Leibovitz has served as our Chief Financial Officer since January 1, 2017. Mr. Leibovitz has over over 27 years of experience in senior management,finance, investor relations, mergers and acquisitions business development in international pharma and biotech companies. From September 2007 to October 2011,Mr. Leibovitz served as Chief Financial Officer of Kamada Ltd. (NASDAQ:KMDA), from November 2011 to December 2015 as the Chief Financial Officer of Ntrig Ltdand as Chief Financial Officer of Evogene Ltd. (NYSE:EVGN) from December 2015 to December 2016. Among his achievements, he led Kamada Ltd. to a successfullarge scale fund raising (including PIPE round, public rights offering, venture lending and public convertible debt) and led the sale of Ntrig Ltd to Microsoft. Mr.Leibovitz hold a BBA degree from the City University of New York.Dr. Ronit BakimerKleiner has served as our Chief Development Officer since November 2017. Prior to joining us, from 2008 to 2017, Dr. BakimerKleinerserved as General Manager of Cognate Bioservices Israel, a contract bioservices organization focused on the regenerative medicine and cell therapy market. Prior tothat from 2006 to 2008, Dr. BakimerKleiner was Laboratory Director at the International Center for Cell Therapy & Cancer at Tel Aviv Sourasky Medical Center andfrom 1997 to 2006 held various positions at Proneuron Biotechnologies including Director of Cell Therapy. Dr. BakimerKleiner holds a B.Sc. in Life Sciences from TelAviv University and a M.Sc. and Ph.D. in Immunology from BenGurion University followed by 4 years postdoc at The Weizmann Institute of Science.Abraham Nahmias has served as a member of our board of directors since July 2014. Since 1985, Mr. Nahmias has served as a founding partner of NahmiasGrinberg C.P.A., an accounting firm. Mr. Nahmias serves or has served as a member of the board of directors of several private and public companies includingRotshtein Real Estate (TASE: ROTS), Orad Ltd., Allium Medical Ltd. (TASE: ALMD), Nano Dimension Ltd. (NASDAQ: NNDM) and Eviation Aircraft Ltd. (OTC:EVTNF). Mr. Nahmias holds a B.A. degree in Economics and Accounting from Tel Aviv University, and has had a C.P.A. license since 1982.Dr. Ruth Ben Yakar has served as a member of our board of directors since July 2014. Dr. Ben Yakar has over 24 years of experience in the biomedical field,including 17 years of management in the biotech industry, leading diverse corporate, business, operational, financial, clinical development, and research activities.Since December 2014, Dr. Ben Yakar has served as the CEO and a director at BioSight Ltd., a clinicalphase biotech company. Since September 2016, Dr. BenYakarhas served on the board of directors of Biondvax (NASDAQ: BVXV) and she is also a business consultant to several biomed companies, and a guest lecturer atLahav, the Recannati Business School of TelAviv University. From 2012 until 2014, Dr. Ben Yakar served as the CEO of Procognia, a biotech company traded on theTASE and from November 2014 to April 2017 she was a director at SHL Medicine (SIX Swiss Exchange: SHLTN). Additionally, from 2012 until 2015, Dr. Ben Yakarwas a director at Israel Advanced Technology Industries or IATI. Prior to that, Dr. Ben Yakar served as the CEO of Thrombotech, where she led a multicenter phaseII clinical trial and led the company to acquisition. She also served as the Chief Business Officer of YEDA, the technology transfer company of the WeizmannInstitute of Science, responsible for the commercialization of the WIS technologies, and was Vice President in several Biotech companies where she led diverseproduct development activities and clinical and preclinical R&D projects. Dr. Ben Yakar holds a PhD Cum Laude from the Weizmann Institute of Science. Herresearch, in the field of oncology, yielded several prestigious publications and awards.68Yuval Berman has served as a member of our board of directors since 2009. Mr. Berman serves as one of our external directors and serves on our auditcommittee, and compensation committee. Mr. Berman is the founder and managing director of U.V.B Business Initiatives Ltd., a business consultancy firm based inTel Aviv established in 2002. Previously, Mr. Berman worked in the investment banking and underwriting units of Poalim Capital Markets & Investments Ltd. andOmega Investments Ltd., a publicly traded financial services group. Preceding this, Mr. Berman practiced corporate law for four years. Mr. Berman previously servedon the board of directors of Elbit Vision Systems Ltd. (Nasdaq: EVSNF), as well as several private companies. He holds an LL.B. and B.A. degrees in Law andEconomics from Tel Aviv University and an MBA from the Solvay Business School, Université Libre De Bruxelles. Mr. Berman is a member of the Israeli bar.Michael Berelowitz has served as a member of our board of directors since March 2017. Since 2011, Dr. Berelowtiz has been selfemployed as abiopharmaceutical consultant. From 2009 to 2011, Dr. Berelowitz served as Senior Vice President and Head of Clinical Development and Medical Affairs in theSpecialty Care Business Unit at Pfizer, Inc. From 1996 to 2009, he served in various other roles at Pfizer, Inc., beginning as a Medical Director in the Diabetes ClinicalResearch team and then assuming positions of increasing responsibility. Prior to 1996, Dr. Berelowitz spent a number of years in academia. Dr. Berelowitz also serveson the board of directors of Recro Pharma Inc. (NASDAQ: REPH), a clinical stage specialty pharmaceutical company, Kamada Ltd. (NASDAQ: KMDA), a plasmaderived protein therapeutics company focused on orphan indications, and previously served as a director of Oramed Pharmaceuticals Inc. from June 2010 untilAugust 30, 2016. Among his public activities, Dr. Berelowitz has served on the board of directors of the American Diabetes Association, the Clinical InitiativesCommittee of the Endocrine Society, and has chaired the Task Force on Research of the New York State Council on Diabetes. He has also served on several editorialboards, including the Journal of Clinical Endocrinology and Metabolism and Endocrinology, Reviews in Endocrine and Metabolic Disorders and Clinical Diabetes.Dr. Berelowitz has authored and coauthored more than 100 peerreviewed journal articles and book chapters in the areas of pituitary growth hormone regulation,diabetes and metabolic disorders. Dr. Berelowitz holds adjunct appointments as Professor of Medicine in the Divisions of Endocrinology and Metabolism at SUNY Stony Brook and Mt. Sinai School of Medicine in New York.Ruhama Avraham, has served as a member of our board of directors since December 2017. Ms. Avraham is a former member of the Knesset with adistinguished political career. Since 2013, Ms. Avraham has been providing strategic support and consulting to enterprises and organizations such asManufacturers Association of Israel, Bank Hapoalim, Giza Singer Even Ltd., Coca Cola and Skylock, Nefesh B’nefesh and World ORT. Since 2017, Ms. Avrahamserves as external director of Minrav Holdings Ltd. and Canada’s Sky Line and was previously an external director of B. Yair Building Corp. Prior to that after herelection to the Knesset, from 2003 to 2013, Ms. Avraham served in various political and governmental roles in Israel including Minister of Tourism, Acting Ministerof the Interior, Deputy Knesset Speaker and Member of Knesset as the Opposition Chairwoman, Member of the Financial Committee and Member of the ForeignAffairs and Defense Committee. She received her bachelor’s degree in social science from BarIlan University, and an MBA in Organizational Management and HRManagement from the Peres Academic Center.David Braun has served as a member of our board of directors since December 2017. Mr. Braun has nearly 20 years of experience spanning across variousroles in research and development, operations, business management, merger and acquisition integrations and organizational transformation. Since 2015, Mr. Braunhas been the Head of Medical Device Business at Merck KGaA Group. From 2011 to 2015, Mr. Braun was Director of Global Research and Development andOperations at Newell Brands. Prior to that from 2007 to 2011, he was the Vice President in Research and Development and Operations at Biosafe. Mr. Braun has alsoheld various positions in project management and system engineering. He received his Master of Science in applied physics and electrooptical engineering in 1997at the National High School of Physics of Strasbourg, and has participated in Executive leadership and general management programs at IMD and at the HarvardBusiness School.69Our Scientific Advisory TeamOur Scientific Advisory Team includes specialists and experts in Israel, with experience in the fields of Biochemistry, infectious diseases and medicalresearch. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. OurScientific Advisory Team members are entitled, according to their work and contribution to us, to either hourly or monthly consulting fees.Our Scientific Advisory Team is comprised of the following members:Professor Dov Zipori is the Director of the Helen and Martin Kimmel Institute for Stem Cell Research at the WIS. Pluristem’s technology is based on Prof.Zipori’s scientific research.Dr. Susan Alpert has served as the Director of Medical Device Assessment in the FDA, as well as senior VP Regulatory at Medtronic Inc. (NYSE:MDT)and C. R. BARD Inc.Professor Robert Negrin is the Medical Director of the Clinical Bone Marrow Transplantation Laboratory and the Division Chief of the Blood and MarrowTransplant Program at Stanford University.Professor John F. DiPersio is Chief of Oncology at the Washington University School of Medicine in St. Louis. He specializes in bone marrowtransplantations, leukemia, gene therapy and GvHD.Professor Francesco Dazzi is a specialist in Regenerative and Haematological Medicine and is KHP Lead for Cellular Therapies at King's College London.Professor Dazzi is also a member of editorial boards at leading scientific journals.Professor Corey Cutler is a hematologist affiliated with the DanaFarber Cancer Institute and the Brigham and Women’s Hospital. He is also AssociateProfessor, Medicine at Harvard Medical School.Family RelationshipsThere are no family relationships between any members of our executive management and our directors.Arrangements for Election of Directors and Members of ManagementThere are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive managementor our directors were selected.B.CompensationThe aggregate compensation expensed, including sharebased compensation and other compensation expensed by us and our subsidiaries to our directorsand senior management with respect to the year ended December 31, 2017 was approximately $2.5 million.The table below sets forth the compensation paid to our five most highly compensated senior office holders (as defined in the Companies Law) during orwith respect to the year ended December 31, 2017, in the disclosure format of Regulation 21 of the Israeli Securities Regulations (Periodic and Immediate Reports),1970. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.”For purposes of the table and the summary below, and in accordance with the above mentioned securities regulations, “compensation” includes basesalary, bonuses, equitybased compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and anyundertaking to provide such compensation.70Name and Principal PositionBase Salary(NIS inthousands)(includingsocialallowance)VariableCompensation(1)(NIS inthousands)EquityBasedCompensation(2)(NIS inthousands)Other(NIS in thousands)Total(3)(NIS inthousands)Conveniencetranslationinto USD in thousands (6)Kasbian Nuriel Chirich,Chairman of the Board of Directors551126995121,684486Dr. Shai Yarkoni,Chief Executive Officer & Director1,1383782,11173,6341,048Eyal Leibovitz,Chief Financial Officer922278(5)884102,094604Dr. Yaron PeregChief Development Officer(4)5534616615177Dr. Amotz Nechushtan,Vice President Research and Development51660576166(1)Amounts reported in this column refer to variable compensation such as commission, incentive and bonus payments for the year ended December 31, 2017(including any cash bonuses paid in 2018). Cash bonuses are intended to promote our work plan and business strategy by rewarding senior office holders forachievement of business and financial goals through team work and collaboration. Key performance indicators which are factored into cash bonusdeterminations are individual specific and may include: (i) progress in our ongoing Phase I/II clinical trial, (ii) completion of strategic and supplier transactions,(iv) raising funds, and (v) strengthening of the board.(2)Amounts reported in this column represent the expense recorded in the Company’s financial statements for the year ended December 31, 2017 with respect toequitybased compensation. Assumptions and key variables used in the calculation of such amounts are discussed in note 12 to the consolidated financialstatements.(3)All amounts reported in the table are in terms of cost to us.(4)Dr. Pereg ceased serving as our Chief Development Officer on October 25, 2017.(5)Includes a onetime payment of NIS 42,000 for services performed for us prior to commencing employment.(6)Calculated using the exchange rate reported by the Bank of Israel for December 31, 2017 at the rate of one U.S. dollar per NIS 3.467.Compensation of DirectorsAs approved by our shareholders at our 2016 annual meeting of shareholders, in connection with their services as directors of the Company, each of ourdirectors from time to time, including external directors, is entitled to an annual payment of NIS 25,000, plus valueadded tax, or VAT, if applicable, payable quarterlyat the end of each quarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, eachof our directors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they haveparticipated in.For the outstanding equitybased awards granted to our directors, see below under “Item 6. Directors, Senior Management and Employees—E. ShareOwnership—Certain Information Concerning Equity Awards to Office Holders.”Compensation of External DirectorsEach of our external directors is entitled to an annual amount of NIS 25,000, plus VAT, if applicable, payable in quarterly installments at the end of eachquarter. In addition, in accordance with the companies regulations (rules regarding compensation and expenses to external directors) 2000, each of our externaldirectors are entitled to receive an average payment of NIS 1,300 plus VAT, if applicable, per each board meeting or board committee meetings they have participatedin. The compensation of external directors is also subject to the provisions of the Israeli regulations promulgated pursuant to the Companies Law governing theterms of compensation payable to external directors, or the Compensation Regulations, which provide that such compensation will not be less than the MinimumAmount (as such term is defined in the Compensation Regulations). See also “Item 6. Directors, Senior Management and Employees—C. Board Practices—ExternalDirectors & Financial Experts” below.71Employment Agreements with Senior ManagementOur senior management are employed under the terms and conditions prescribed in personal contracts. These personal contracts provide for notice periodsof varying duration for termination of the agreement by us or by the relevant member of senior management, during which time such person will continue to receivebase salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment ofinventions. However, the enforceability of the noncompetition and assignment of inventions provisions may be limited under applicable law. See “RiskFactors — Risks Related to Our Operations in Israel.”For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.Chairman of the Board of Directors Agreement with Kasbian Nuriel ChirichOn April 30, 2013, we entered into a Chairman of the board of directors agreement with Kasbian Nuriel Chirich, employing him on a parttime basis asChairman of the board of directors. Mr. Chirich’s current monthly salary is NIS 35,000. Mr. Chirich is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses. The agreement originally had a term of 36 months and was renewable for additional terms of 36 months subject to anyapprovals that are required by law. The agreement is terminable by either party upon 180 days prior written notice and is terminable immediately by CellectBiotherapeutics for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Mr. Chirich. As part of the amendment, we extended the employmentagreement for a further 36 months. Pursuant to the terms of the amendment, Mr. Chirich will continue to be employed on a parttime basis, consisting of at least 75%of his time, as the Chairman of the board of directors of the Company. The amendment provided for an increase in Mr. Chirich’s monthly salary to up to NIS 35,000and an annual bonus of up to NIS 100,000 for the year 2016 if certain objectives were met. In addition, Mr. Chirich will be entitled to an allocation to a manager’sinsurance policy, pension plan, study fund and disability insurance.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 1,442,729 ordinary shares to Mr. Chirich. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.72Employment Agreement with Shai YarkoniOn April 30, 2013, we entered into an employment agreement with Dr. Shai Yarkoni employing him on fulltime basis as Chief Executive Officer. Dr. Yarkoni’scurrent monthly salary is NIS 70,000. Dr. Yarkoni is entitled to an allocation to a manager’s insurance policy and study fund. Dr. Yarkoni is also entitled toreimbursement for reasonable outofpocket expenses, including travel expenses and a company car and mobile phone. The agreement has a term of 36 months andis terminable by either party upon 180 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.On July 24, 2016, we entered into an amendment to the employment agreement with Dr. Yarkoni. As part of the amendment, we extended the employmentagreement for a further 36 months. The amendment provided for an increase in Dr. Yarkoni’s monthly salary to up to NIS 70,000 and an annual bonus of up to fivemonthly salaries for the year 2016 if certain objectives were met.On September 8, 2014, we granted options to purchase 1,200,000 ordinary shares to Dr. Yarkoni. The options are exercisable at a price of NIS 1.40 per share.The options vested each quarter from the date of grant over three years in twelve equal installments and are fully vested. The options expire on September 8, 2024.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Yarkoni. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 3,024,040 ordinary shares to Dr. Yarkoni for his service on the board of directors. The options areexercisable at NIS 1.20 per share and expire on February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grantdate and the remaining three quarters vesting over the remaining 36 months on a quarterly basis beginning 12 months from the grant date.Employment Agreement with Eyal LeibovitzOn October 25, 2016, we entered into an employment agreement with Eyal Leibovitz, employing him on fulltime basis as Chief Financial Officer effectiveDecember 31, 2016. Mr. Leibovitz’s current monthly salary is NIS 52,500. In addition, Mr. Leibovitz will be entitled to an annual bonus equal up to 5 months’ salarybased upon the completion of certain targets to be determined by the compensation committee and the board of directors, commencing in 2017 and thereafter. Mr.Leibovitz is entitled to an allocation to a manager’s insurance policy and study fund. Mr. Leibovitz is also entitled to reimbursement for reasonable outofpocketexpenses, including travel expenses, professional fees, director and officer insurance and a company car and mobile phone. The agreement is terminable by eitherparty upon 90 days prior written notice and terminable immediately by us for cause as such term is defined in the employment agreement.In addition, pursuant to the employment agreement, we granted to Mr. Leibovitz options to purchase 1,936,503 ordinary shares at an exercise price of NIS0.819 per share. The options vest on a quarterly basis in equal installments over 36 months. In the case of termination of the employment agreement not due to amaterial breach as defined therein, the vested options shall be exercisable for a period of 12 months from the date of termination. In addition, the employmentagreement provided that upon the earlier of one year from the date of the option grant or such time as an analyst from a reputable investment bank in the U.S.publishes a favorable analyst report, Mr. Leibovitz will be entitled to an additional option to purchase 107,584 ordinary shares. These options were granted onJanuary 1, 2018.Services Agreement with Dr. Ruth Ben YakarIn September 2014, a special meeting of shareholders approved entering into a services agreement with Dr. Ruth Ben Yakar under which Dr. Ben Yakar willprovide up to 20 hours per month of assistance to our Chief Executive Officer in business development and raising money for a monthly fee of NIS 6,000. In April2015, our shareholders approved an increase to Dr. Ben Yakar’s monthly fee to up to NIS 14,000, reflecting a maximum of 40 hours per month of services, effectiveNovember 15, 2014.73In addition, in September 2014, we granted to Dr. Ben Yakar options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share. Theoptions vested on a quarterly basis in equal installments over 36 months and are fully vested. The options expire on September 28, 2025.On August 26, 2015, we granted options to purchase 72,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.90 per share and expire onAugust 26, 2025. The options vest each quarter from the date of grant over three years in twelve equal installments.On February 28, 2017, we granted options to purchase 78,000 ordinary shares to Dr. Ben Yakar. The options are exercisable at NIS 1.20 per share and expireon February 27, 2027. The options vest over a period of 48 months, with one quarter vesting 12 months from the grant date and the remaining three quarters vestingover the remaining 36 months on a quarterly basis beginning 12 months from the grant date.C.Board PracticesIntroductionBoard of DirectorsUnder the Companies Law and our articles of association, our board of directors directs our policy and supervises the performance of our Chief ExecutiveOfficer. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executiveofficers are responsible for our daytoday management and have individual responsibilities established by our board of directors. Our Chief Executive Officer isappointed by, and serves at the discretion of, our board of directors. All other executive officers are also appointed by our board of directors, and are subject to theterms of any applicable employment or services agreements that we may enter into with them or with certain entities through which we receive their services.All of our directors other than Dr. Shai Yarkoni, Kasbian Nuriel Chirich and Dr. Ruth Ben Yakar are independent under NASDAQ rules. The definition ofindependent director under the NASDAQ rules and external director under the Companies Law overlap to a significant degree such that we would generally expectthe two directors serving as external directors to satisfy the requirements to be independent under NASDAQ rules. The definition of external director includes a setof statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director toexercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that theboard of directors consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our externaldirectors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders, while independent directors maybe elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as anexternal director.Under our articles of association, our board of directors must consist of at least five and not more than eight directors, including at least two externaldirectors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our nonexecutive Chairman of theboard of directors.Under a founders agreement among Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. NadirAskenasy, our former Chief Technology Officer, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of onedirector (and remove any director so appointed). In addition, under a voting agreement among Kasbian Nuriel Chirich and Dr. Shai Yarkoni, the parties agreed tocoordinate their votes with respect to any vote taken of our shareholders. See “Related Party Transactions” below. We are not a party to this founders agreement orvoting agreement and are not bound by it. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or specialgeneral meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of thevoting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors.See “— External Directors” below. We have held elections for each of our nonexternal directors at each annual meeting of our shareholders since our initial publicoffering in Israel.74In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office endingon the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles of association or anyapplicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three yearsand may be elected for up to two additional threeyear terms, provided that, for Israeli companies traded on NASDAQ and certain other international exchanges,such term may be extended indefinitely in increments of additional threeyear terms. External directors may be removed from office only under the limitedcircumstances set forth in the Companies Law. See “— External Directors” below.Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise. See “— External Directors.” In determining the number of directors required to have such expertise, our board of directors must consider, among otherthings, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number ofdirectors of our company who are required to have accounting and financial expertise is two. Our board of directors has determined that Yuval Berman and AbrahamNahmias have accounting and financial expertise and possess professional qualifications as required under the Companies Law.Chairman of the BoardOur articles of association provide that the Chairman of the board of directors is appointed by the members of the board of directors and serves asChairman of the board of directors throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the ChiefExecutive Officer or a relative of the Chief Executive Officer may not serve as the Chairman of the board of directors, and the Chairman or a relative of the Chairmanmay not be vested with authorities of the Chief Executive Officer without shareholder approval consisting of a majority vote of the shares present and voting at ashareholders meeting, provided that either:●such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interestin such appointment, present and voting at such meeting (not including abstaining shareholders); or●the total number of shares of noncontrolling shareholders and shareholders who do not have a personal interest in such appointment votingagainst such appointment does not exceed 2% of the aggregate voting rights in the company.In addition, a person subordinated, directly or indirectly, to the Chief Executive Officer may not serve as the Chairman of the board of directors; theChairman of the board of directors may not be vested with authorities that are granted to those subordinated to the Chief Executive Officer; and the Chairman of theboard of directors may not serve in any other position in the company or a controlled company, except as a director or Chairman of a controlled company.External DirectorsUnder the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange inor outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards ofindependence.According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accountingexpertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accountingexpertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional termunless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another termthere is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is atleast equal to the minimum number determined appropriate by the board of directors.75A director has “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain seniorpositions.Ruhama Avraham and Yuval Berman have served as our external directors since 2017 and 2009 respectively, and both have the requisite accounting andfinancial expertise. Ruhama Avraham was elected to serve from December 13, 2017 to December 12, 2020. Yuval Berman was initially elected to serve from August 27,2009 to August 27, 2012, reelected to serve an additional term from August 27, 2012 and until August 27, 2015 and reelected to serve a final term from August 27,2015 until August 27, 2018The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by amajority vote of the shares present and voting at a shareholders meeting, provided that either:●such majority includes at least a majority of the shares held by all shareholders who are noncontrolling shareholders and do not have a personalinterest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) thatare voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or●the total number of shares voted by noncontrolling shareholders and by shareholders who do not have a personal interest in the election of theexternal director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding suchability deriving solely from his or her position as a director of the company or from any other position with the company. A shareholder is presumed to be acontrolling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of thecompany or its general manager. With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the votingrights in a public company if no other shareholder holds more than 50% of the voting rights in the company.The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to twoadditional threeyear terms, except as provided below, provided that either:●his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rightsand is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by noncontrolling, disinterestedshareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director soreappointed may not be a Related or Competing Shareholder, as defined below, or a relative of such shareholder, at the time of the appointment,and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’sreappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing thereappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of thereappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a businessrelationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the ISA, maydetermine matters that under certain conditions will not constitute a business relationship or competition with the company; or●his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the samemajority required for the initial election of an external director (as described above).76The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be extended indefinitelyin increments of additional threeyear terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of theexternal director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficialto the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as describedabove). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the termpreviously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissalby the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case,only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If anexternal directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is requiredunder the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, exceptthat the audit committee and the compensation committee must include all external directors then serving on the board of directors.External directors may be compensated only in accordance with regulations adopted under the Companies Law.Committees of the Board of DirectorsOur board of directors has established three standing committees, the audit committee, the financial statement examination committee the compensationcommittee.Audit CommitteeOur audit committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman serves asChairman of the audit committee.Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as Chairman of the committee. Under the Companies Law, the audit committee may not include the Chairman of theboard of directors, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regularbasis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on acontrolling shareholder.In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an“unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:●he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident(which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and●he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break ofless than two years in service shall not be deemed to interrupt the continuation of the service.77The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniThe Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the auditcommittee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject;provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions ofthe committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretarywho are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the membersof the audit committee, provided such majority is comprised of a majority of independent directors, at least one of which is an external director.Under the NASDAQ corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each ofwhom is financially literate and one of whom has accounting or related financial management expertise.All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQcorporate governance rules. Our board of directors has determined that Yuval Berman and Abraham Nahmias are audit committee financial experts as defined by theSEC rules, have the requisite financial sophistication as required by the NASDAQ corporate governance rules.Each of the members of the audit committee is deemed “independent” as such term is defined in Rule 10A3(b)(1) under the Exchange Act, according towhich an audit committee member is barred from accepting any consulting, advisory or other compensatory fee from the company or any subsidiary thereof, otherthan in the member's capacity as a member of the board of directors, and may not be an affiliated person of the company or any subsidiary of the company apartfrom his or her capacity as a member of the board of directors and any committee of the board of directors.Our board of directors has adopted an audit committee charter which became effective upon the listing of our ADSs and warrants on NASDAQ that setsforth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of NASDAQ, as well as the requirements for suchcommittee under the Companies Law, including the following:●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagementof our independent registered public accounting firm to the board of directors in accordance with Israeli law;●recommending the engagement or termination of the person filling the office of our internal auditor; and●recommending the terms of audit and nonaudit services provided by the independent registered public accounting firm for preapproval by ourboard of directors.Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by preapproving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the auditefforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.Under the Companies Law, our audit committee is responsible for:●determining whether there are deficiencies in the business management practices of our company, including in consultation with our internalauditor or the independent auditor, and making recommendations to the board of directors to improve such practices;78●determining the approval process for transactions that are ‘nonnegligible’ (i.e., transactions with a controlling shareholder that are classified bythe audit committee as nonnegligible, even though they are not deemed extraordinary transactions), as well as determining which types oftransactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by theaudit committee;●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest andwhether such transaction is extraordinary or material under Companies Law) (see “— Approval of Related Party Transactions under Israeli Law”);●where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board ofdirectors and proposing amendments thereto;●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities;●examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors orshareholders, depending on which of them is considering the appointment of our auditor; and●establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided tosuch employees.Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law” below), unlessat the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.Financial Statement Examination CommitteeUnder the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists ofmembers with accounting and financial expertise or the ability to read and understand financial statements, unless the board of directors of such company opts foran exemption under relevant regulations promulgated under the Israeli Companies Law, as our board of directors has done. Accordingly, in July 2016 our board ofdirectors adopted a resolution that our audit committee is assigned the responsibilities and duties of the financial statements examination committee. From time totime as necessary and required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire boardof directors regarding financial statement approval. The function of a financial statements examination committee is to discuss and provide recommendations to itsboard of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with thepreparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financialstatements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; (5) value evaluations, including theassumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent auditors and our internalauditors are invited to attend all meetings of audit committee when it is acting in the role of the financial statements examination committee.Compensation Committee and Compensation PolicyOur compensation committee consists of Abraham Nahmias along with our two external directors, Ruhama Avraham and Yuval Berman. Mr. Berman servesas Chairman of the compensation committee.The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagementof office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a SpecialApproval for Compensation as described below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executiveofficers”.79Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Thecompensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of thecompensation committee, and one of the external directors must serve as Chairman of the committee. However, subject to certain exceptions, Israeli companieswhose securities are traded on stock exchanges such as NASDAQ, and who do not have a controlling shareholder, do not have to meet this majority requirement;provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction wherethe company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceedan amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to whomay not be a member of the committee.The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth inthe Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensationcommittee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (1) such majority includesa majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting(abstentions are disregarded) or (2) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter whowere present and voted against the compensation policy, constitute two percent or less of the voting power of the company.To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company mayoverride the resolution of the shareholders following a rediscussion of the matter by the board of directors and the compensation committee and for specifiedreasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholdersand their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is notmaterial in relation to its existing terms.Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy,and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2017.The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy mustrelate to certain factors, including advancement of the company’s objectives, the company’s business plan and its longterm strategy, and creation of appropriateincentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensationpolicy must furthermore consider the following additional factors:●the knowledge, skills, expertise and accomplishments of the relevant office holder;●the office holder’s roles and responsibilities and prior compensation agreements with him or her;80●the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of thecompany, including those employed through manpower companies, in particular the ratio between such cost and the average and mediancompensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;●the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on theexercise value of noncash variable equitybased compensation; and●as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period,the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company.The compensation policy must also include:●a link between variable compensation and longterm performance and measurable criteria;●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements;●the minimum holding or vesting period for variable, equitybased compensation; and●maximum limits for severance compensation.The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including:●recommending whether a compensation policy should continue in effect, if the thencurrent policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);●recommending to the board of directors periodic updates to the compensation policy;●assessing implementation of the compensation policy; and●determining whether the compensation terms of the Chief Executive Officer of the company need not be brought to approval of the shareholders.Our compensation committee's responsibilities include:●reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers;●reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officersincluding evaluating their performance in light of such goals and objectives;81●reviewing and approving the granting of options and other incentive awards; and●reviewing, evaluating and making recommendations regarding the compensation and benefits for our nonemployee directors.Internal AuditorUnder the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation ofthe audit committee. An internal auditor may not be:●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;●an office holder (including a director) of the company (or a relative thereof); or●a member of the company’s independent accounting firm, or anyone on his or her behalf.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On May 31, 2016, weappointed Sapir Guy as our internal auditor. Sapir Guy is a certified internal auditor and a partner at Kesselman & Kesselman (PwC), a certified public accounting firmin Israel.The Chairman of the board of directors will be the direct supervisor of the internal auditor, unless the board of directors shall determine otherwise,according to our articles of association and the Companies Law. The internal auditor is required to submit his or her findings to the audit committee, unless specifiedotherwise by the board of directors.Each director, except external directors, will hold office until the annual general meeting of our shareholders for the year in which his or her term expires,unless he or she is removed by a simple majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, inaccordance with the Companies Law and our amended and restated articles of association.Approval of Related Party Transactions under Israeli LawFiduciary Duties of Directors and Executive OfficersThe Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Directors and SeniorManagement” above is an office holder under the Companies Law.An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in goodfaith and in the best interests of the company.The duty of care includes a duty to use reasonable means to obtain:●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and●all other important information pertaining to any such action.82The duty of loyalty includes a duty to:●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;●refrain from any activity that is competitive with the company;●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder.Disclosure of Personal Interests of an Office Holder and Approval of Certain TransactionsThe Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and allrelated material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest ofany person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative ofsuch person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, butexcluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person forwhom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or sheholds a proxy even if such shareholder has no personal interest in the matter. An office holder is not, however, obligated to disclose a personal interest if it derivessolely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinarytransaction is defined as any of the following:●a transaction other than in the ordinary course of business;●a transaction that is not on market terms; or●a transaction that may have a material impact on a company’s profitability, assets or liabilities.If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an officeholder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemeda breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed bythe office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s auditcommittee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requiresapproval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking toindemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number ofspecific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided thateither: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest insuch compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of noncontrolling shareholders and shareholders who donot have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require theapproval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a SpecialApproval for Compensation.83Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the Chairman of the relevant committee or board of directors, as applicable, determines that he or she shouldbe present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, asapplicable, has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors,as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereofshall also require the approval of the shareholders.Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain TransactionsPursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder whoholds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, theholdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee or the compensationcommittee, as the case may be, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary transactions with acontrolling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directlyor indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who isnot an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred to asa Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:●at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting atthe meeting approving the transaction, excluding abstentions; or●the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at themeeting do not exceed 2% of the voting rights in the company.To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances relatedthereto.Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy.Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative of a controlling shareholder,or a director that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the auditcommittee and board of directors and subject Company's Compensation Policy.84Shareholder DutiesPursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders andto refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respectto the following matters:●an amendment to the company’s articles of association;●an increase of the company’s authorized share capital;●a merger; or●the approval of related party transactions and acts of office holders that require shareholder approval.In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder whoknows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder whohas the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does notdefine the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach ofthe duty to act with fairness.Exculpation, Insurance and Indemnification of Directors and OfficersUnder the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpatean office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if aprovision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpatein advance a director from liability arising out of a prohibited dividend or distribution to shareholders.Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by himor her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include aprovision authorizing such indemnification, which ours do:●financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approvedby a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertakingmust be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when theundertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under thecircumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding institutedagainst him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against suchoffice holder as a result of such investigation or proceeding; and (b) no financial liability, such as a criminal penalty, was imposed upon him or heras a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposedwith respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and●reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against himor her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or asa result of a conviction for an offense that does not require proof of criminal intent.85Under the Companies Law and the Israeli Securities Law 57281968, or the Israeli Securities Law, a company may insure an office holder against thefollowing liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:●a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that theact would not harm the company;●a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and●a financial liability imposed on the office holder in favor of a third party.Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities:●a breach of duty of care to the company or to a third party;●any other action against which we are permitted by law to insure an office holder;●expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law includingthe Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 57712011, or the Efficiency of EnforcementProcedures, and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigationexpenses and attorney fees; and●a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:●a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that theoffice holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;●a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;●an act or omission committed with intent to derive illegal personal benefit; or●a fine, civil fine, administrative fine or ransom or levied against the office holder.Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensationcommittee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See “—Approval ofRelated Party Transactions under Israeli Law.”Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by theCompanies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative EnforcementProcedure.We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articlesof association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification will be limited to eventsdetermined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors asreasonable under the circumstances.86The maximum indemnification amount will be limited to an amount which shall not exceed 25% of our net assets based on our most recently audited orreviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) underinsurance and/or by a thirdparty pursuant to an indemnification arrangement.In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policyand therefore unenforceable.We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and payall premiums thereunder to the fullest extent permitted by the Companies Law.D.Employees.As of December 31, 2017, we had twenty four fulltime employees. These employees are comprised of eighteen in research and development and sixemployees in management, finance and administration. From time to time, we also employ independent contractors to support our operations. Our employees are notrepresented by any collective bargaining agreements and we have never experienced an organized work stoppage. All our employees are located in Israel.E.Share Ownership.Stock Option PlansEquity Compensation PlanWe maintain our 2014 Cellect Option Plan, which was originally adopted by our board of directors in February 2014 and is scheduled to expire in February2024. The 2014 Cellect Option Plan provides for the grant of options to our directors, officers, employees, consultants, advisers and service providers. As ofDecember 31, 2017, options to purchase 10,638,969 ordinary shares were outstanding and up to 422,170 ordinary shares are available for issuance. Of suchoutstanding options, options to purchase 3,106,084 ordinary shares are exercisable as of December 31, 2017, with a weighted average exercise price of NIS 1.34 pershare, and will expire 10 years from the date of grant, during the years 2024 – 2027.The 2014 Cellect Option Plan provides for options to be granted at the determination of our board of directors (which is entitled to delegate its powersunder the 2014 Cellect Option Plan to our compensation committee) in accordance with applicable laws. Upon termination of employment for any reason, other thanin the event of death or disability or for cause, all unvested options will expire and all vested options at time of termination will generally be exercisable for 90 daysfollowing termination, subject to the terms of the 2014 Cellect Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the2014 Cellect Option Plan) the grantee’s right to exercise all vested and unvested the options granted to him or her will expire immediately. Upon termination ofemployment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months after date of termination, subject to the termsof the 2014 Cellect Option Plan and the governing option agreement.Pursuant to the 2014 Cellect Option Plan, we may award options pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and section3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinanceprovides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of our share capital, or to beentitled to 10% of our profits or to appoint a director to our board of directors) and are Israeli residents, favorable tax treatment for compensation in the form ofshares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are(or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be depositedwith a trustee appointed by us in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in theemployee income track or the capital gains track.87Options granted under the 2014 Cellect Option Plan are subject to applicable vesting schedules and generally expire ten years from the grant date.In the event that options allocated under the 2014 Cellect Option Plan expire or otherwise terminate in accordance with the provisions of the 2014 CellectOption Plan, such expired or terminated options will become available for future grant awards and allocations under the 2014 Cellect Option Plan. We have registeredthe ordinary shares available for issuance under the 2014 Cellect Option Plan pursuant to a Registration Statement on Form S8.See also Item 7.A below.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersThe following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 12, 2018 by:●each of our directors and senior management;●all of our directors and senior management as a group; and●each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ordinary shares.Ordinary shares issuable under share options, warrants or other conversion rights currently exercisable or that are exercisable within 60 days after March 12, 2018are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or other conversion rights, but are notdeemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned before this offering isbased on 130,192,799 ordinary shares outstanding (which excludes 2,641,693 shares held in treasury) on March 12, 2018.Except where otherwise indicated, and except pursuant to community property laws, we believe, based on information furnished by such owners, that thebeneficial owners of the shares listed below have sole investment and voting power with respect to, and the sole right to receive the economic benefit of ownershipof, such shares. The shareholders listed below do not have any different voting rights from any of our other shareholders. We know of no arrangements that would,at a subsequent date, result in a change of control of our Company.Number ofSharesBeneficiallyPercentageOwnershipDirectors and Senior ManagementKasbian Nuriel Chirich (1)33,525,97225.6%Dr. Shai Yarkoni (2)33,525,97225.6%Eyal Leibovitz (3)819,267* Dr. Ronit BakimerKleiner (4)Abraham Nahmias (5)91,500* Ruth Ben Yakar (6)191,500* Yuval Berman (7)91,500* Michael Berelowitz (8)37,500*Ruhama Avraham (9)David Braun (9)Directors and Senior Management as a group (10 persons)34,757,23926.4%More than 5% ShareholdersMichael Ilan Management and Investments Ltd. (10)(11)14,962,47011.4%Nadir Askenasy (12)6,858,5855.3%Shlomit Askenasy (12)6,858,5845.3%*Less than 1%(1)Represents (i) 16,425,600 ordinary shares owned by Mr. Chirich, (ii) 12,420 ADS representing 248,400 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per shareand expiring on August 25, 2025, (iv) options to purchase 360,682 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27,2027, and (v) 16,419,290 ordinary shares beneficially owned by Dr. Yarkoni over which Mr. Chirich has shared voting power pursuant to a voting agreement.Excludes options to purchase 1,082,047 ordinary shares that vest in more than 60 days from March 12, 2018.88(2)Represents (i) 14,095,740 ordinary shares owned by Dr. Yarkoni, (ii) 14,777 ADS representing 295,540 ordinary shares issuable upon exercise of warrants atan exercise price of $7.50 per ADS and expiring on July 29, 2021, (iii) options to purchase 1,200,000 ordinary shares, at an exercise price of NIS 1.40 pershare and expiring on September 8, 2024, (iv) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August26, 2025, (v) options to purchase 756,010 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027, and (vi) 17,106,682ordinary shares beneficially owned by Mr. Chirich over which Dr. Yarkoni has shared voting power pursuant to a voting agreement. Excludes options topurchase 2,268,030 ordinary shares that vest in more than 60 days from March 12, 2018.(3)Represents (i) 7,500 ordinary shares owned by Mr. Leibovitz, and (ii) options to purchase 811,767 ordinary shares at an exercise price of NIS 0.819 per shareand expiring on October 26, 2026 and November 20, 2027. Excludes options to purchase 1,232,320 ordinary shares that vest in more than 60 days fromJanuary March 12, 2018.(4)Excludes options to purchase 74,000 ordinary shares that vest in more than 60 days from March 12, 2018.(5)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, and (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinaryshares that vest in more than 60 days from March 12, 2018.(6)Represents (i) options to purchase 100,000 ordinary shares at an exercise price of NIS 1.40 per share and expiring on September 28, 2024, (ii) options topurchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (iii) options to purchase 19,500 ordinary sharesat an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options to purchase 58,500 ordinary shares that vest in more than 60days from March 12, 2018.(7)Represents (i) options to purchase 72,000 ordinary shares at an exercise price of NIS 1.90 per share and expiring on August 26, 2025, (ii) options topurchase 19,500 ordinary shares at an exercise price of NIS 1.437 per share and expiring on December 12, 2027. Excludes options to purchase 58,500ordinary shares that vest in more than 60 days from March 12, 2018.(8)Represents options to purchase 37,500 ordinary shares at an exercise price of NIS 1.20 per share and expiring on February 27, 2027. Excludes options topurchase 112,500 ordinary shares that vest in more than 60 days from March 12, 2018.(9)Excludes options to purchase 150,000 ordinary shares that vest in more than 60 days from March 12, 2018.(10)Based on information publically available from the Israeli Registrar of Companies, this entity is under control of, and affiliated with Mr. Michael Ilan andPazit Ilan Berkowitz.(11)Represents (i) 14,385,540 ordinary shares owned by Michael Ilan Management and Investment Ltd., and (ii) 28,846 ADS representing 576,930 ordinaryshares issuable upon exercise of warrants at an exercise price of $7.50 per ADS and expiring on August 3, 2021.(12)To our knowledge, Mr. Askenasy transferred half of his ordinary shares to Ms. Askenasy, his former spouse.To our knowledge, from the date immediately prior to our U.S. initial public offering on August 3, 2016 to March 12, 2018, the ownership percentage ofKasbian Nuriel Chirich decreased by 7.2% from 20.3% to 13.1%, the ownership percentage of Shai Yarkoni decreased by 5.7% from 18.1% to 12.4% during suchperiod (in each case of Mr. Chirich and Dr. Yarkoni without giving effect to the voting agreement they are party to), the ownership percentage of Michael IlanManagement and Investments Ltd. decreased by 9.4% from 20.9% to 11.5% and the ownership percentage of Nadir Askenasy decreased by 11.6% from 16.9% to5.3%.Bank of New York Mellon, or BNY, is the holder of record for our ADR program, pursuant to which each ADS represents 20 ordinary shares. As of March12, 2018, BNY held 129,830,140 ordinary shares representing 99.8% of the outstanding share capital held at that date. Certain of these ordinary shares were held bybrokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficialholders or of the residence of beneficial holders.None of our shareholders has different voting rights from other shareholders. To our knowledge, we are not owned or controlled, directly or indirectly, byanother corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of us.89B.Related Party TransactionsThe following is a description of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. Thedescriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the completeagreements.We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained fromunaffiliated third parties. See “Board Practices — Approval of Related Party Transactions under Israeli Law.”Founders Agreement and Voting AgreementOn June 1, 2011, Kasbian Nuriel Chirich, our Chairman, Dr. Shai Yarkoni, our Chief Executive Officer and director, and Dr. Nadir Askenasy, our former ChiefTechnology Officer entered into a founders agreement with respect to Cellect Biotherapeutics, our subsidiary. Subsequently, on May 16, 2013, the parties to thefounders agreement entered into an agreement pursuant to which it was agreed that the founders agreement will apply to the parties with respect to us following themerger which closed on July 1, 2013.Under the founders agreement, each founder holding at least 30% of our share capital shall be entitled to recommend the appointment of one director (andremove any director so appointed). The founders agreement also provides preemptive rights, rights of first refusal, cosale rights and bring along rights among thefounders subject to certain permitted transfers.Under a voting agreement dated August 14, 2017, among Dr. Shai Yarkoni and Kasbian Nuriel, the parties agreed to coordinate their votes with respect toany vote taken of our shareholders.Indemnification AgreementsOur articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the CompaniesLaw. We have obtained directors’ and officers’ insurance for each of our officers and directors. We have entered into indemnification and exculpation agreementswith each of our current office holders and directors, exculpating them to the fullest extent permitted by the law and our articles of association and undertaking toindemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extentsuch liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”Employment and Service AgreementsWe have employment, service or related agreements with certain members of senior management and directors. See “Item 6.B. Compensation”.OptionsWe have granted options to purchase our ordinary shares to certain of our officers and directors. See “Item 6.B. Compensation” and “Item 7.A. MajorShareholders”. We describe our option plans under “Item 6.E. Share Ownership” and “Item 7.A. Major Shareholders”.C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATION.A.Consolidated Statements and Other Financial Information.See “Item 18. Financial Statements.”Legal ProceedingsFrom time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently nota party to any material legal or administrative proceedings and except as set forth below ,are not aware of any pending or threatened material legal or administrativeproceedings against us.DividendsWe have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earningsin developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and willdepend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, businessprospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, whichpermits the distribution of dividends only out of distributable profits. See “Memorandum and Articles of Association — Dividends.” See “Taxation — Israeli TaxConsiderations and Government Programs.”90If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms ofthe deposit agreement, including the fees and expenses payable thereunder. No dividends will accrue for any unexercised warrants. Cash dividends on our ordinaryshares, if any, will be paid to ADS holders in U.S. dollars.B.Significant ChangesNo significant change, other than as otherwise described in this annual report on Form 20F, has occurred in our operations since the date of ourconsolidated financial statements included in this annual report on Form 20F.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOn July 29, 2016, our ADSs and warrants, commenced trading on The Nasdaq Capital Market under the symbols “APOP” and “APOPW”, respectively.From 1990 to September 3, 2017, our shares were traded on the Tel Aviv Stock Exchange.The following table sets forth, for the periods indicated, the reported high and low closing sale prices of the ADSs on The Nasdaq Capital Market in U.S.dollars.U.S.$Price PerADSHighLowAnnual:2016 (from July 29, 2016)5.3002.660Quarterly:First Quarter 2018 (through March 12, 2018)9.9907.110Fourth Quarter 20179.3006.520Third Quarter 201710.0606.250Second Quarter 201710.3607.600First Quarter 201710.9003.068Fourth Quarter 20164.6302.660Third Quarter 2016 (from July 29, 2016)5.3004.390Most Recent Six Months:March 2018 (through March 12, 2018)7.6007.110February 20188.4007.210January 20189.9907.120December 20178.6796.520November 20178.6797.130October 20179.3007.820September 201710.0607.800On March 12, 2018, the last reported sales price of the ADSs on The Nasdaq Capital Market was $7.50 per ADS.91The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our listed warrants on The Nasdaq Capital Marketin U.S. dollars.U.S.$Price PerWarrantHighLowAnnual:2016 (from July 29, 2016)0.9700.520Quarterly:First Quarter 2018 (through March 12, 2018)2.8502.000Fourth Quarter 20173.1401.854Third Quarter 20173.0001.470Second Quarter 20173.2901.750First Quarter 20173.6440.380Fourth Quarter 20160.8500.520Third Quarter 2016 (from July 29, 2016)0.9700.525Most Recent Six Months:2.8501.900March 2018 (through March 12, 2018)2.1202.000February 2018January 20182.8501.900December 20173.1401.990November 20172.7001.990October 20172.8001.854September 20173.0002.230August 20172.5301.470On March 12, 2018, the last reported sales price of the listed warrants on The Nasdaq Capital Market was $2.00 per warrant.B. Plan of DistributionNot applicable.C. MarketsOur ADSs and warrants are listed on The Nasdaq Capital Market.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationOur registration number with the Israeli Registrar of Companies is 520036484.92Articles of AssociationThe following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of ourordinary shares.Purposes and Objects of the CompanyOur purpose is set forth in Section 2 of our articles of association and includes every lawful purpose.Registration NumberOur number with the Israeli Registrar of Companies is 520036484.Voting RightsHolders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholders meeting.Shareholders may vote at shareholders meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholderresolutions by means of written consent in lieu of a shareholders meeting. The board of directors shall determine and provide a record date for each shareholdersmeeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the priorapproval of a simple majority of our shares represented and voting at a general meeting.Transfer of SharesOur ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer isrestricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. See “Shares Eligible for Future Sale” with respect to theapplicable U.S. law. The ownership or voting of our ordinary shares by nonresidents of Israel is not restricted in any way by our articles of association or Israeli law,except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.The Powers of the DirectorsOur board of directors directs our policy and supervises the performance of our Chief Executive Officer. Pursuant to the Companies Law and our articles ofassociation, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised ortaken by our shareholders.Amendment of Share CapitalOur articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law andmust be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactionsthat have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits, require aresolution of our board of directors and court approval.DividendsUnder Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that thedistribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, thedistribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distributionaccording to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date ofdistribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seekthe approval of the court in order to distribute a dividend. The court may approve our request if it determines that there is no reasonable concern that the paymentof a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.93Shareholders MeetingsUnder Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Ourboard of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the CompaniesLaw and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (1) any two of ourdirectors or one quarter of the directors then in office; or (2) one or more shareholders holding, in the aggregate either (a) 5% of our issued share capital and 1% ofour outstanding voting power, or (b) 5% of our outstanding voting power.Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors and in accordance with the Companies Law and its Regulations.Furthermore, the Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of ourshareholders:● amendments to our articles of association;●appointment or termination of our auditors;●appointment and dismissal of directors and external directors;●approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;●director compensation, indemnification and change of the principal executive officer;●increases or reductions of our authorized share capital;●the exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of anyof its powers is required for our proper management; and●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; orauthorize the company’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authorityThe Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting. In the event theagenda of the meeting includes the manners specified under bullets 3, 4, 5, 7 and 9 above, or the approval of transactions with office holders or interested or relatedparties, a notice must be provided at least 35 days prior to the meeting.The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articlesof association do not allow shareholders to approve corporate matters by written consent.Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote beforethe shareholders at a general meeting.QuorumThe quorum required for our general meetings of shareholders consists of two or more shareholders present in person, by proxy or by other votinginstrument in accordance with the Companies Law and our articles of association who hold or represent, in the aggregate, at least 33 1/3% of the total outstandingvoting rights, within half an hour from the appointed time.94A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified inthe summons or notice of the meeting. At the reconvened meeting, and within half an hour from the appointed time, any number of our shareholders present inperson or by proxy shall constitute a lawful quorum.ResolutionsOur articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which theshareholder indicates how he or she votes on resolutions relating to the following matters:●an appointment or removal of directors;●an approval of transactions with office holders or interested or related parties, that require shareholder approval;●an approval of a merger;●authorizing the Chairman of the board of directors or his relative to act as the company’s Chief Executive Officer or act with such authority; or authorize thecompany’s Chief Executive Officer or his relative to act as the Chairman of the board of directors or act with such authority;●any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate anyadditional matters; and●other matters which may be prescribed by Israel’s Minister of Justice.The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its othershareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matterssuch as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions.A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, anyshareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, canappoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The CompaniesLaw does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to actwith fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by asimple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for thevoluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by writtenballot and voting on the resolution.In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders ofa class of shares with preferential rights that may be authorized in the future.95Access to Corporate RecordsUnder the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholdersregister and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the IsraeliCompanies Registrar and the ISA. Any of our shareholders may request to review any document in our possession that relates to any action or transaction with arelated party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if wedetermine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwiseprejudice our interests.Acquisitions under Israeli LawFull Tender OfferA person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstandingshares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstandingshare capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of theissued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital ofthe company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that amajority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tenderoffer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have apersonal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the courtwithin six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tenderoffer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that ashareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosedthe information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued andoutstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.Special Tender OfferThe Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that anacquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% ormore of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one ofthe exemptions in the Companies Law is met.A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% ofthe voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of sharestendered in the offer exceeds the number of shares whose holders objected to the offer.96If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or suchcontrolling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with thetarget company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in theinitial special tender offer.Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares arelisted for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting thepercentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the ISA’s opinion is that such leniencydoes not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including NASDAQ, which do not providefor sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply tosuch companies.MergerThe Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders meeting called with at least 35 days’ prior notice.For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at theshareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or theright to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approvalof each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and theconsideration offered to the shareholders.Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists areasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may furthergive instructions to secure the rights of creditors.In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by eachparty with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.Antitakeover MeasuresThe Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providingcertain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized orissued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, dependingon the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium overthe market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the priorapproval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in theCompanies Law as described above.97C.Material ContractsExcept as set forth below, we have not entered into any material contract within the two years prior to the date of this annual report on Form 20F, otherthan contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above,“Item 4.B. Business Overview” above, and “Item 7A. Major Shareholders” or Item 7B. “Related Party Transactions” above.U.S. IPOOn July 29, 2016, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC, or Wainwright, as the representative of the underwritersnamed therein and bookrunning manager with respect to the public offering of our ADSs and warrants that were offered under a registration statement (RegistrationNo. 333212432). On August 3, 2016, we sold an aggregate of 1,292,308 ADSs and warrants to purchase 969,231 ADSs to the underwriters in the public offering.Additionally, the underwriters’ overallotment option was partially exercised by the underwriters for the purchase of warrants to purchase 65,890 ADSs. The netproceeds to the Company were approximately $7.6 million (after deducting underwriters’ fees).September 2017 FinancingOn September 7, 2017, we entered into Securities Purchase Agreements, or the 2017 Purchase Agreements, with certain accredited investors providing forthe issuance of an aggregate of 531,136 ADSs in a registered direct offering at a purchase price of $8.10 per ADS for aggregate gross proceeds of approximately $4.3million. The offering closed on September 11, 2017.In addition, under the 2017 Purchase Agreements, the investors receives unregistered warrants to purchase an aggregate of 265,568 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the date of issuance at an exercise price of $12.07 per ADS, subject to adjustment as set forththerein. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.The 2017 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement with Wainwright dated September 6, 2017, pursuant to which Wainwright agreed to serve as the placement agent forthe Company in connection with the offering. We paid Wainwright a cash placement fee equal to 7% of the aggregate purchase price for the ADSs placed by theplacement agent, plus a nonaccountable expense allowance of $15,000 and up to $30,000 for certain expenses. Wainwright also received compensation warrants onsubstantially the same terms as the investors in the offering, except the exercise price shall be $10.125 per ADS, in an amount equal to 5% of the aggregate number ofADSs sold in the offering that were placed by the placement agent.January 2018 FinancingOn January 29, 2018, we entered into Securities Purchase Agreements, or the 2018 Purchase Agreements, with certain institutional investors providing forthe issuance of an aggregate of 484,848 ADSs in a registered direct offering at a purchase price of $8.25 per ADS for aggregate gross proceeds of approximately $4.0million. The offering closed on January 31, 2018.In addition, under the 2018 Purchase Agreements, the investors received unregistered warrants to purchase an aggregate of 266,667 ADSs. The warrantsmay be exercised immediately for a period of twelve months from the earlier of (i) the effectiveness date of a registration statement registering the shares underlyingthe warrants, and (ii) 6 months from the issuance date of the warrants, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basisif there is no effective registration statement registering the ADSs underlying the warrants.98Under the 2018 Purchase Agreements, we agreed to use best efforts to file, as soon as practicable (and in any case by February 28, 2018), a registrationstatement with the SEC registering the resale of the ordinary shares underlying the ADSs issuable upon exercise of the warrants and to use best efforts to causesuch registration statement to be declared effective within 60 days following the closing date and to keep such registration statement effective at all times until nopurchaser owns any underlying ordinary shares issuable upon exercise of the warrants. If such registration statement is not declared effective within 60 days of theclosing date, we agreed to pay monthly registration delay payments of 1.5% of the purchase price paid by the investors up to an aggregate of 8% until such timethat the registration statement is declared effective by the SEC.Further, under the 2018 Purchase Agreements, we agreed not to enter into any agreement to issue or announce the issuance or proposed issuance of anyADSs, ordinary shares or ordinary share equivalents for a period of 45 days following the closing of the offering, subject to certain customary exceptions. Inaddition, the 2018 Purchase Agreements provide that for a period of one year following the closing of the offering, we will not effect or enter into an agreement toeffect a “variable rate transaction” as defined in the 2018 Purchase Agreements.The 2018 Purchase Agreements also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.We also entered into a letter agreement, or the 2018 Placement Agent Agreement, with Wainwright dated January 15, 2018, pursuant to which Wainwrightagreed to serve as the placement agent for us in connection with the offering. Under the letter agreement, we paid the Placement Agent a cash placement fee equalto 7% of the aggregate purchase price for the ADSs placed by the placement agent, plus a nonaccountable expense allowance of $25,000. Wainwright also receivedcompensation warrants on substantially the same terms as the investors in the offering, except the exercise price shall be $10.31 per ADS, in an amount equal to 5%of the aggregate number of ADSs sold in the offering that were placed by the placement agent.D.Exchange ControlsThere are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or theproceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However,legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.The ownership or voting of our ordinary shares by nonresidents of Israel, except with respect to citizens of countries that are in a state of war with Israel,is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.E.Taxation.The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ourordinary shares or ADSs or warrants (all referred to below as the Shares). You should consult your own tax advisor concerning the tax consequences of yourparticular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.Israeli Tax Considerations and Government ProgramsThe following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income taxconsequences concerning the ownership and disposition of our Shares. This summary does not discuss all the aspects of Israeli income tax law that may be relevantto a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examplesof this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that thediscussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate taxauthorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annualreport and does not take into account possible future amendments which may be under consideration.99General corporate tax structure in IsraelIsraeli resident companies, such as us, are generally subject to corporate tax at the rate of 25% as of January 1, 2016. In 2017 and 2018 the corporate tax ratewill be 24% and 23% accordingly.Capital gains derived by an Israeli resident company are subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporationwill be considered as an “Israeli Resident” if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business areexercised in Israel.Law for the Encouragement of Industry (Taxes), 57291969The Law for the Encouragement of Industry (Taxes), 57291969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” Cellect Biotherapeutics is currently qualified as an Industrial Company within the meaning of the Industry Encouragement Law.The Industry Encouragement Law defines an “Industrial Company” as a company resident in Israel, of which 90% or more of its income in any tax year,other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principalactivity in a given tax year is industrial production.The following corporate tax benefits, among others, are available to Industrial Companies:●amortization over an eightyear period of the cost of purchased knowhow and patents and rights to use a patent and knowhow which are usedfor the development or advancement of the company; and●under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies. Eligibility for benefits under the Industry Encouragement Law is not contingent upon the approval of any governmental authority.There can be no assurance that Cellect Biotherapeutics will continue to qualify as an Industrial Company or that the benefits described above will beavailable in the future.Law for the Encouragement of Capital Investments, 57191959The Law for the Encouragement of Capital Investments, 57191959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).The Investment Law was significantly amended effective amended as of January 1, 2011, or the 2011 Amendment.The 2011 Amendment introduced benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined inthe Investment Law) as of January 1, 2011. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect toits income derived by its Preferred Enterprise unless the Preferred Enterprise is located in a specified development zone (Cellect Biotherapeutics is not), in whichcase the rate will be 9%. Under the 2011 Amendment, the corporate tax rate is 16% and 9% in 2014 and thereafter.Tax benefits are available under the 2011 Amendment to production facilities (or other eligible facilities), which are generally required to derive more than25% of their business income from export and meet additional criteria stipulate in the amendment.Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at the rate of 20% or such lower rate as may beprovided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (however, if afterward distributed toindividuals or a nonIsraeli company a withholding of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply).100From time to time, the Israeli Government has discussed reducing the benefits available to companies under the Investment Law. The termination orsubstantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.Currently, Cellect Biotherapeutics is in a loss position for tax purposes and therefore does not implement the tax benefits according to the Investment Law.However, we believe that once Cellect Biotherapeutics will have taxable income, it will be eligible for a reduced corporate tax rate according to the Investment Law.Taxation of our Israeli individual shareholders on receipt of dividendsIsraeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Shares (other than bonus shares or sharedividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time duringthe preceding 12month period.As of January 1, 2013, an additional income tax at a rate of 2% is imposed on high earners whose annual income or gain exceeds NIS 810,720. As of January,2017 the tax rate will be 3% on high earners whose annual income or gain exceeds NIS 640,000.A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis,holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits,nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or sheis to exercise such right(s), and all regardless of the source of such right.The term “Israeli resident” is generally defined under Israeli tax legislation with respect to individuals as a person whose center of life is in Israel. TheOrdinance provides that in order to determine the center of life of an individual, account will be taken of the individual’s family, economic and social connections,including: (a) place of permanent home; (b) place of residential dwelling of the individual and the individual’s immediate family; (c) place of the individual’s regular orpermanent occupation or the place of his permanent employment; (d) place of the individual’s active and substantial economic interests; (e) place of the individual’sactivities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present inIsrael for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’spresence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual orby the assessing officer.Taxation of Israeli Resident Corporations on Receipt of DividendsIsraeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our Shares.Capital Gains Taxes Applicable to Israeli Resident ShareholdersThe income tax rate applicable to real capital gain (capital gain less the effect of inflation) derived by an Israeli individual from the sale of shares which hadbeen purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (asdefined above) at the time of sale or at any time during the preceding 12month period, such gain will be taxed at the rate of 30%. As of January 1, 2013, an additionaltax at a rate of 2% is imposed on high earners whose annual income or gains exceed NIS 810,720. As of January, 2017 the tax rate will be 3% on high earners whoseannual income or gain exceeds NIS 640,000.101Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary businessincome, are taxed in Israel at ordinary income rates (25% as of 2016 for corporations and up to 48% for individuals).Taxation of NonIsraeli Shareholders on Receipt of DividendsNonIsraeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Shares at the rate of 25% or 30% if such recipient is a“substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date. If the Shares are held by a nominee company, thenominee company or the financial institution will withhold at the source a tax of 25% whether the recipient is a substantial shareholder or not. Otherwise, thewithholding at the source will be 25% or 30% in accordance with the above, unless a lower tax rate is provided in a tax treaty between Israel and the shareholder’scountry of residence.A nonIsraeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of suchincome; provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income inIsrael.For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes onIncome, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividendspaid out of the profits of a “Approved Enterprise”, subject to certain conditions. Where the recipient is a U.S. corporation owning 10% or more of the voting sharesof the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of itsprior taxable year (if any) and the dividend is not paid from the profits of a Approved Enterprise, and not more than 25% of the gross income of the payingcorporation consists of interest or dividends (other than interest derived from the conduct of banking, insurance, or financing business or interest received fromsubsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends orinterest is received) the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.Capital gains income taxes applicable to nonIsraeli shareholders.NonIsraeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of ourShares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, nonIsraelicorporations will not be entitled to the foregoing exemptions if Israeli residents (1) jointly have a controlling interest of more than 25% in such nonIsraelicorporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such nonIsraeli corporation, whether directly or indirectly.Regardless of whether shareholders may be liable for Israeli income tax on the sale of our Shares, the payment of the consideration may be subject towithholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order toavoid withholding at source at the time of sale.Estate and gift taxIsraeli law presently does not impose estate or gift taxes.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR ISRAELI TAX CONSEQUENCES OFPURCHASING, HOLDING, AND DISPOSING OF OUR SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLELAWS.102U.S. Federal Income Tax ConsiderationsTHE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BECONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULARU.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORYSHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S.Holder” arising from the purchase, ownership and sale of the ordinary shares, ADSs and warrants. For this purpose, a “U.S. Holder” is a beneficial owner of ordinaryshares or ADSs or warrants that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of theUnited States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federalincome tax purposes) created or organized under the laws of the United States, any state therein, or the District of Columbia; (3) an estate, the income of which isincludable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; and (5) a trust that hasa valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income taxconsiderations that may be relevant to a decision to purchase our ordinary shares or ADSs or warrants. This summary generally considers only U.S. Holders thatwill own our ordinary shares or ADSs or warrants as capital assets (generally, property held for investment). Except to the limited extent discussed below, thissummary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’sstatus as a U.S. Holder. This summary is based on the provisions of the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder,administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change,possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income taxtreatment of an investment in our ordinary shares or ADSs or warrants by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with theconclusions set forth below.This discussion does not address all of the tax considerations that may be relevant to a particular U.S. Holder based on such holder’s particularcircumstances, or to U.S. Holders that are subject to special treatment under U.S. federal income tax law, including: (1) banks, life insurance companies, regulatedinvestment companies, or other financial institutions or “financial services entities”; (2) brokers or dealers in securities or foreign currency; (3) persons whoacquired our ordinary shares or ADSs or warrants in connection with employment or other performance of services; (4) U.S. Holders that are subject to the U.S.alternative minimum tax; (5) U.S. Holders that hold our ordinary shares or ADSs or warrants as a hedge or as part of a hedging, straddle, conversion or constructivesale transaction or other riskreduction transaction for U.S. federal income tax purposes; (6) taxexempt entities; (7) real estate investment trusts; (8) U.S. Holders thatexpatriate out of the United States or former longterm residents of the United States; or (9) U.S. Holders having a functional currency other than the U.S. dollar. Thisdiscussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs orwarrants representing 10% or more of our voting power or value. This discussion also does not address any U.S. state or local or nonU.S. tax considerations, anyU.S. federal estate, gift, generationskipping, transfer, or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal incometax consequences.If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs or warrants, the tax treatment ofsuch entity or arrangement treated as a partnership and each person treated as a partner thereof generally will depend upon the status and activities of the entityand such person. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal incometax considerations applicable to it and its partners of the purchase, ownership and disposition of our ordinary shares or ADSs or warrants.103Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding ordisposing of our ordinary shares or ADSs or warrants, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.Taxation of Dividends Paid on ordinary shares or ADSsWe do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading“Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid onordinary shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed ourcurrent or accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our current andaccumulated earnings and profits will be treated first as a nontaxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to theextent thereof, and then as capital gain. Corporate holders generally will not be allowed a deduction for dividends received.In general, preferential tax rates for “qualified dividend income” and longterm capital gains are applicable for U.S. Holders that are individuals, estates ortrusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” isa corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS hasstated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on NASDAQ or another establishedsecurities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as aPFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has notheld our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the exdividend date, or (2) to the extentthe U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk ofloss on our ordinary shares or ADSs are not counted towards meeting the 61day holding period. Finally, U.S. Holders who elect to treat the dividend income as“investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any propertydistributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in theincome of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder,and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts theNIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. sourceordinary exchange gain or loss.Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive categoryincome for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income taxliability for Israeli income tax withheld from distributions received in respect of the ordinary shares or ADSs. The rules relating to the determination of the U.S.foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit.U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize theirdeductions.104Taxation of the Disposition of Ordinary Shares or ADSs or WarrantsSubject to the discussion under the heading “Passive Foreign Investment Companies” below, upon the sale, exchange or other taxable disposition of ourordinary shares or ADSs or warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s taxbasis for the ordinary shares or ADSs or warrants in U.S. dollars and the amount realized on the disposition in U.S. dollars (or its U.S. dollar equivalent determinedby reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on thesale, exchange or other disposition of ordinary shares or ADSs or warrants will be longterm capital gain or loss if the U.S. Holder has a holding period of more thanone year at the time of the disposition. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currencyother than U.S. dollars upon the disposition of their ordinary shares.Gain realized by a U.S. Holder on a sale, exchange or other disposition of ordinary shares or ADSs or warrants will generally be treated as U.S. sourceincome for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of ordinary shares or ADSs or warrants isgenerally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of ordinary shares or ADSs or warrants issubject to limitations.Passive Foreign Investment CompaniesSpecial U.S. federal income tax laws apply to U.S. taxpayers who owns shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federalincome tax purposes for any taxable year that either:●75% or more of our gross income (including our pro rata share of gross income for any company in which we are considered to own 25% or moreof the shares by value) is passive; or●at least 50% of our assets, averaged quarterly over the year (including our pro rata share of the assets of any company in which we are consideredto own 25% or more of the shares by value) and generally determined based upon value (provided we were not considered a “controlled foreigncorporation” prior to the public offering) are held for the production of, or produce, passive income. For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions andfrom notional principal contracts. Cash is treated as generating passive income.A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature, and our status for any year will depend onour income, assets, and activities for such year. We believe that we were a PFIC for our 2017 taxable year. Because the PFIC determination is highly fact intensive,there can be no assurance that we will not be a PFIC for 2018 or for any other taxable year. U.S. Holders who hold ordinary shares or ADSs or warrants during aperiod when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to specified exceptions for U.S. Holders who made a“qualified electing fund” or “QEF”, or “marktomarket” election. Upon request, we expect to provide the information necessary for U.S. Holders to make QEFelections if we are classified as a PFIC.If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who hasnot elected to mark the shares to market (as discussed below), will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion ofany distributions received by the nonelecting U.S. Holder on the ordinary shares or ADSs or warrants in a taxable year in excess of 125% of the average annualdistributions received by the nonelecting U.S. Holder in the three preceding taxable years, or, if shorter, the nonelecting U.S. Holder’s holding period for theordinary shares or ADSs or warrants), and (ii) any gain realized on the sale or other disposition of such ordinary shares or ADSs or warrants. Under these rules:●the excess distribution or gain would be allocated ratably over the nonelecting U.S. Holder’s holding period for such ordinary shares or ADSs orwarrants;●the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and105●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to eachsuch other taxable year.In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive astepup to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by thedecedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held theordinary shares or ADSs or warrants while we were a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has madesuch a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinaryincome and such U.S. Holder’s pro rata share of our net capital gains as longterm capital gain, regardless of whether we make any distributions of such earnings orgain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholderbyshareholder basisand generally may be revoked only with the consent of the IRS.In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a marktomarket election. A U.S. Holder of ourordinary shares or ADSs or warrants which are regularly traded on a qualifying exchange, including Nasdaq, can elect to mark the ordinary shares or ADSs orwarrants to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fairmarket value of the ordinary shares or ADSs or warrants and the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs or warrants. Losses are allowedonly to the extent of net marktomarket gain previously included income by the U.S. Holder under the election for prior taxable years. Thus, a U.S. Holder mayrecognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in our ordinary shares or ADSs orwarrants would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares or ADSs orwarrants would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares or ADSs or warrants would betreated as ordinary loss to the extent that such loss does not exceed the net marktomarket gains previously included in income by the U.S. Holder, and any loss inexcess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualifieddividend income or longterm capital gains.U.S. Holders who do not make a timely QEF election or a marktomarket election, and who hold our ordinary shares or ADSs or warrants during a periodwhen we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFICrules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or marktomarket election with respect to ourordinary shares or ADSs or warrants in the event that we are a PFIC.Tax on Investment IncomeU.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (includingdividends on and gains from the sale or other disposition of our ordinary shares and ADSs or warrants), or in the case of estates and trusts on their net investmentincome that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.Tax Consequences for NonU.S. Holders of Ordinary Shares or ADSs or WarrantsExcept as provided below, an individual, corporation, estate or trust that is not a U.S. Holder, referred to below as a nonU.S. Holder, generally will not besubject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our ordinary shares or ADSs orwarrants.106A nonU.S. Holder may be subject to U.S. federal income tax on a dividend paid on our ordinary shares or ADSs or warrants or gain from the disposition ofour ordinary shares or ADSs or warrants if: (1) such item is effectively connected with the conduct by the nonU.S. Holder of a trade or business in the UnitedStates, or, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in the caseof a disposition of our ordinary shares or ADSs or warrants, the individual nonU.S. Holder is present in the United States for 183 days or more in the taxable year ofthe disposition and other specified conditions are met.In general, nonU.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our ordinary shares or ADSs orwarrants if payment is made through a paying agent or office of a foreign broker outside the United States. However, if payment is made in the United States or by aU.S. related person, nonU.S. Holders may be subject to backup withholding, unless the nonU.S. Holder provides an applicable IRS Form W8 (or a substantiallysimilar form) certifying its foreign status, or otherwise establishes an exemption.The amount of any backup withholding from a payment to a nonU.S. Holder will be allowed as a credit against such holder’s U.S. federal income taxliability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.Information Reporting and WithholdingA U.S. Holder may be subject to backup withholding at a rate of 24% with respect to dividends and proceeds from a disposition of ordinary shares or ADSsor warrants. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will notapply with respect to payments made to designated exempt recipients, such as corporations and taxexempt organizations. Backup withholding is not an additionaltax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.A U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our ordinary shares or ADSs or warrants, unless suchordinary shares or ADSs or warrants are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS ifthe aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amountas may be prescribed by applicable IRS guidance). U.S. Holders should consult their tax advisors as to the possible obligation to file such information reports inlight of their particular circumstances.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements willfile reports with the SEC. You may read and copy the annual report on Form 20F, including the related exhibits and schedules, and any document we file with theSEC without charge at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents atprescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1800SEC0330for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers thatfile electronically with the SEC. Our filings with the SEC will also available to the public through the SEC's website at www.sec.gov.107As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers,directors and principal shareholders will be exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptlyas U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscalyear, or such applicable time as required by the SEC, an annual report on Form 20F containing financial statements audited by an independent registered publicaccounting firm, and may submit to the SEC, on a Form 6K, unaudited quarterly financial information.We maintain a corporate website www.cellectbio.com. Information contained on, or that can be accessed through, our website and the other websitesreferenced above do not constitute a part of this annual report on Form 20F. We have included these website addresses in this annual report on Form 20F solely asinactive textual references. I.Subsidiary Information.Not applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKIn the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.Quantitative and Qualitative Disclosure About Market RiskWe are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, resultsof operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments.Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.Interest Rate RiskFollowing the date of this annual report, we do not anticipate undertaking any significant longterm borrowings. At present, our investments consistprimarily of cash and cash equivalents and financial assets at fair value. Following the date of this annual report, we may invest in investmentgrade marketablesecurities with maturities of up to three years, including commercial paper, money market funds, and government/nongovernment debt securities. The primaryobjective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing riskand loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of ourinvestments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the shortterm maturities, if any, of our investments todate, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy tohold such investments to maturity in order to limit our exposure to interest rate fluctuations.Foreign Currency Exchange RiskOur foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainlyagainst the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollarexpenses consist principally of payments made to subcontractors and consultants for clinical trials and other research and development activities as well aspayments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against theU.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results ofoperations or financial condition.108To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financialexposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the materialadverse effects of such fluctuations.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt Securities.Not applicable.B.Warrants and rights.Not applicable.C.Other Securities.Not applicable.D.American Depositary SharesFees and ExpensesPersons depositing or withdrawing ordinary shares or ADS holders must pay:For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution of ordinaryshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates$.05 (or less) per ADSAny cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed to youhad been ordinary shares and the ordinary shares had been deposited forissuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders$.05 (or less) per ADS per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of ordinary shares on our share register to or from thename of the depositary or its agent when you deposit or withdraw ordinarysharesExpenses of the depositaryCable, telex and facsimile transmissions (when expressly provided in the depositagreement); converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has to payon any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes,stamp duty or withholding taxesAs necessaryAny charges incurred by the depositary or its agents for servicing the depositedsecuritiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductionfrom cash distributions or by directly billing investors or by charging the bookentry system accounts of participants acting for them. The depositary may collectany of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that areobligated to pay those fees. The depositary may generally refuse to provide feeattracting services until its fees for those services are paid.109From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenanceof the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. Inperforming its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by oraffiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement andthe rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that theexchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that themethod by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. Themethodology used to determine exchange rates used in currency conversions is available upon request.PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThere are no material modifications to the rights of security holders.Use of Proceeds Initial Public OfferingThe effective date of the registration statement (File no. 333212432) for our initial U.S public offering of our ADSs and warrants, was July 28, 2016. Theoffering with respect to our ADSs and warrants commenced on July 28, 2016 and was closed on August 3, 2016. H.C. Wainwright & Co., LLC was the bookrunningmanager for the offering. We registered 1,292,308 American Depository Shares (ADSs), each representing 20 of our ordinary shares, and public warrants to purchaseup to 969,231 ADSs, and granted the underwriters a 45day option to purchase up to an additional 193,846 ADSs and/or warrants to purchase an additional 145,385ADSs, at the public offering price, less underwriting discount, to cover overallotments, if any. The overallotment option was partially exercised by the underwritersfor the purchase of warrants to purchase 65,890 ADSs.The gross proceeds received by us from this offering were approximately $8.4 million prior to deducting underwriting discounts, commissions and otherestimated offering expenses. Under the terms of the offering, we incurred aggregate underwriting discounts and commissions of approximately $0.6 million andexpenses of approximately $0.2 million in connection with the offering, resulting in net proceeds to us of approximately $7.6 million. None of the expenses was paiddirectly or indirectly to any director, officer, general partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities,or to any of our affiliatesThe primary purposes of this offering were to fund our Phase I/II single arm, open label clinical trial, perform a pivotal study, develop our ApoTainerselection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as wellas for working capital and other general corporate purposes.110As of March 12, 2018, we have used approximately $3.7 million of the net proceeds of this offering for ongoing R&D and clinical research, approximately$1.8 million to working capital and any other purposes.Our expected use of net proceeds from the offering represents our current intentions based upon our present plans and business condition. As of the dateof this annual report, we cannot predict with certainty any or all of the particular uses for the net proceeds we received upon the completion of the offering, or theamounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending onnumerous factors. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, andinvestors in our securities will be relying on our judgment regarding the application of the net proceeds from the offering.ITEM 15.CONTROLS AND PROCEDURES(a) Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of December 31, 2017, or the Evaluation Date. Based on suchevaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizingand reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated andcommunicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.(b) Management's Annual Report on Internal Control over Financial ReportingOur management, including our CEO, and our CFO, are responsible for establishing and maintaining adequate internal control over our financial reporting,as defined in Rules 13a15(f) and 15d15(f) of the Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. Internal control over financial reporting includes policies and procedures that:●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;●provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles;●provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board ofdirectors (as appropriate); and●provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our financial statements.Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO, and our CFO, we assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2017 based on the framework for Internal ControlIntegrated Framework set forth by The Committee ofSponsoring Organizations of the Treadway Commission (COSO)(2013).111Based on our assessment and this framework, our management concluded that our internal control over financial reporting were effective as of December31, 2017.(c) Attestation Report of the Registered Public Accounting FirmThis annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting due to an exemption for emerging growth companies provided in the JOBS Act.(d) Changes in Internal Control over Financial ReportingDuring the year ended December 31, 2017, there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of the following two members of our audit committee: Yuval Berman and Abraham Nahmias, is an auditcommittee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and Nasdaqrules.ITEM 16B.CODE OF ETHICSOur board of directors has adopted a Code of Ethics which became effective upon the listing of our ADSs and warrants on Nasdaq applicable to all of ourdirectors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similarfunctions, which is a “code of ethics” as defined in Item 16B of Form 20F promulgated by the SEC. The full text of the Code of Ethics is posted on our website atwww.cellectbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this a part of this annual report on Form20F and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from aprovision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not granted any waivers under our Code of Business Conduct and Ethics.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESKost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered public accounting firm, has served as our principalindependent registered public accounting firm for each of the two years ended December 31, 2017 and 2016.The following table provides information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of Ernst & Young Global forall services, including audit services, for the years ended December 31, 2017 and 2016:Year EndedDecember 31,20162017(in thousands)Audit fees (1)$6174Auditrelated fees14634Tax fees (2)196All other fees20Total$246114(1)Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.(2)Includes professional fees related to tax returns.112PreApproval of Auditors' CompensationOur audit committee has a preapproval policy for the engagement of our independent registered public accounting firm to perform certain audit and nonaudit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee preapproves annually a catalog of specific audit and nonaudit services in the categories of audit services, auditrelated services and tax services that may beperformed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general preapproval, it will require specific preapproval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to performthe prohibited nonaudit functions defined in applicable SEC rules.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNot applicable.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEThe SarbanesOxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with variouscorporate governance practices. In addition, we are required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certaincorporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwiseimposed by the NASDAQ Stock Market rules for U.S. domestic issuers.In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected tofollow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:Distribution of certain reports to shareholders. As opposed to the listing rules of NASDAQ, which require listed issuers to make certain reports, such asannual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distributeperiodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make suchreports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statementsavailable to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt fromthe SEC’s proxy solicitation rules.Nomination of directors. With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors areelected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Board Practices.” The nominationsfor directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with theprovisions of our articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the companymay nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board ofdirectors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the listing rulesof NASDAQ.113Compensation of officers. We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilitiesof our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles ofassociation do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of ourboard of directors, determine an executive officer’s compensation, as is generally required under the listing rules of NASDAQ with respect to the Chief ExecutiveOfficer and all other executive officers of a company. However, Israeli law and our articles of association do require that our audit and compensation committees eachcontain two external directors (as defined in the Companies Law. See “Board Practices — External Directors.”). In addition, Israeli law requires that additionalmembers of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itselfin accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law.Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and incertain circumstances by our shareholders, as detailed below under the caption “— Shareholder Approval.” Thus, we will seek shareholder approval for allcorporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring suchapproval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain officeholder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of NASDAQ. See “— Compensation Committee andCompensation Policy” below.Compensation Committee. Pursuant to the Companies Law, we established a compensation committee as detailed above under “Compensation Committeeand Compensation Policy”. Our board of directors has affirmatively determined that each member of our compensation committee qualifies as “independent” underapplicable NASDAQ and SEC rules.Independent directors. Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined underNASDAQ Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described belowunder “Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the CompaniesLaw and the applicable NASDAQ and SEC criteria for independence, and under Israeli law, the audit committee and compensation committee must each include allexternal directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” asdefined in the Companies Law, as described under the caption “— Audit Committee.” Our board of directors has affirmatively determined that each of: DavidGrossman, Yuval Berman and Abraham Nahmias qualifies as “independent” under NASDAQ independence standards.Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law,rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ rule, shareholder approval isgenerally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rightsor if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leadingto a change of control; (iii) adoption or material amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights(including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) ifsuch equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is requiredfor, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for anyother position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b)extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described under “Disclosure of personalinterests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, ifany, or such controlling shareholder’s relative, which require the special approval described under “Disclosure of personal interests of controlling shareholders andapproval of certain transactions, (d) approval of transactions with company’s Chief Executive Officer with respect to his or her compensation, whether in accordancewith the approved compensation policy of the company or not in accordance with the approved compensation policy of the company, or transactions with officersof the company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the company for office holders. Inaddition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.114Other than the foregoing home country practices, we otherwise comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ.We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ corporate governance rules. Following ourhome country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide lessprotection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements and related information pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20F beginning on page F1.ITEM 19.EXHIBITS.Exhibit No.Exhibit Description1.1Articles of Association of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.1 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).1.2Certificate of Name Change of Cellect Biotechnology Ltd. (unofficial English translation from Hebrew original) (included as Exhibit 3.2 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 25, 2016, and incorporated herein byreference).2.1Form of Deposit Agreement between Cellect Biotechnology Ltd., The Bank of New York Mellon as Depositary, and owners and holders from timeto time of ADSs issued thereunder (included as Exhibit 4.1 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).2.2Specimen American Depositary Receipt (included in Exhibit 2.1)2.3Form of Warrant Agent Agreement (included as Exhibit 4.3 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).115Exhibit No.Exhibit Description2.4Form of Underwriters' Warrant (included as Exhibit 4.4 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 26, 2016, and incorporated herein by reference).4.1Founders Agreement dated June 1, 2011 between Kasbian Nuriel Chirich, Dr. Shai Yarkoni, and Dr. Nadir Askenasy (included as Exhibit 10.1 toour Registration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein byreference).4.2Chairman of the Board Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Kasbian Nuriel Chirich (unofficial Englishtranslation from Hebrew original) (included as Exhibit 10.2 to our Registration Statement on Form F1 as filed with the Securities and ExchangeCommission on July 7, 2016, and incorporated herein by reference).4.3Employment Agreement dated April 30, 2013 between Cellect Biotechnology Ltd. and Dr. Shai Yarkoni (unofficial English translation fromHebrew original) (included as Exhibit 10.3 to our Registration Statement on Form F1 as filed with the Securities and Exchange Commission onJuly 7, 2016, and incorporated herein by reference).4.4Cellect Biotechnology Ltd. 2014 Global Incentive Option Scheme (included as Exhibit 10.6 to our Registration Statement on Form F1 as filed withthe Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.5Joint Product Development Agreement dated June 17, 2015 between Cellect Biotechnology Ltd. and Entegris Inc (included as Exhibit 10.7 to ourRegistration Statement on Form F1 as filed with the Securities and Exchange Commission on July 7, 2016, and incorporated herein by reference).4.6Amendment to Dr. Shai Yarkoni Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Dr. Shai Yarkoni (unofficialEnglish translation from Hebrew original) (included as Exhibit 10.8 to our Registration Statement on Form F1/A as filed with the Securities andExchange Commission on July 25, 2016, and incorporated herein by reference).4.7Amendment to Kasbian Nuriel Chirich Employment Agreement dated July 24, 2016 between Cellect Biotherapeutics Ltd. and Kasbian NurielChirich (unofficial English translation from Hebrew original) (included as Exhibit 10.9 to our Registration Statement on Form F1/A as filed withthe Securities and Exchange Commission on July 25, 2016, and incorporated herein by reference).4.8Form of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F1/A as filed with the Securities and ExchangeCommission on July 22, 2016, and incorporated herein by reference).4.9Form of Securities Purchase Agreement for the September 2017 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on September 8, 2017, and incorporated herein reference).116Exhibit No.Exhibit Description4.10Form of Warrant for the September 2017 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on September 8, 2017, and incorporated herein reference).4.11Form of Securities Purchase Agreement for the January 2018 Financing (included as Exhibit 10.1 to our Report on Form 6K as filed with theSecurities and Exchange Commission on January 31, 2018, and incorporated herein reference).4.12Form of Warrant for the January 2018 Financing (included as Exhibit 10.2 to our Report on Form 6K as filed with the Securities and ExchangeCommission on January 31, 2018, and incorporated herein reference).8.1Subsidiaries of Cellect Biotechnology Ltd. (included as Exhibit 21.1 to our Registration Statement on Form F1 as filed with the Securities andExchange Commission on July 7, 2016, and incorporated herein by reference).12.1Certification of the Chief Executive Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*12.2Certification of the Chief Financial Officer pursuant to rule 13a14(a) of the Securities Exchange Act of 1934.*13.1Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.*13.2Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.*15.1Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Israel.*101The following financial information from Cellect Biotechnology Ltd.’s Annual Report on Form 20F for the year ended December 31, 2017,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of ComprehensiveLoss, (iii) Statements of Changes in Equity (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated FinancialStatements.**Filed Herewith117SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20F and that it has duly caused and authorized the undersigned tosign this annual report on Form 20F filed on its behalf.CELLECT BIOTECHNOLOGY LTD.By:/s/ Dr. Shai YarkoniBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young GlobalBy:/s/ Dr. Shai YarkoniDr. Shai YarkoniChief Executive OfficerDate: March 19, 2018118CELLECT BIOTHECHNOLOGY LTDAND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2017NIS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Statements of Changes in EquityF5Consolidated Statements of Cash FlowsF6 – F7Notes to Consolidated Financial StatementsF8 – F29 F1Kost Forer Gabbay & Kasierer144 Menachem Begin Road, Building ATelAviv 6492102, IsraelTel: +97236232525Fax: +97235622555ey.comREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders andBoard of Directors ofCellect Biothechnology Ltd.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cellect Biotechnology Ltd. and its subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the threeyears in the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting StandardsBoard.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 1b to the consolidated financial statements, the Company incurred losses totaling NIS 28,224 thousand and negative cash flow from operating activity totalingNIS 17,770 during the year ended December 31, 2017. Additionally, the Company has not yet generated revenues from its operations and is dependent on externalsources for financing its operations. Due to these conditions, the Company has stated that substantial doubt exists about the Company’s ability to continue as agoing concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1b. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control overfinancial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, weexpress no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011TelAviv, IsraelKOST FORER GABBAY & KASIERERMarch 13, 2018A Member of Ernst & Young GlobalF2CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSIn thousands, except number of shares dataConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsCURRENT ASSETS:Cash and cash equivalents6,27913,7343,961Short term deposits19,660Marketable securities4,99713,9994,038Other receivables1,46181823632,39728,5518,235LONGTERM ASSETS:Restricted cash14030588Other Long term receivables17350Property, plant and equipment, net1,3731,3443881,5131,82252633,91030,3738,761CURRENT LIABILITIES:Trade payables1,4011,703491Other payables2,0842,3966913,4854,0991,182NON CURRENT LIABILITIES:Warrants to ADS1,9387,4222,141CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS' EQUITY :Ordinary shares of no par value:Authorized: 500,000,000 shares at December 31, 2016, and 2017, Issued and outstanding: 107,628,485*)and 120,185,659*) shares as of December 31, 2016 and 2017, respectively. Additional Paid In Capital67,41482,83923,894 Sharebased payments6,2179,3812,706 Treasury shares(9,425)(9,425)(2,718) Accumulated deficit(35,719)(63,943)(18,444)28,48718,8525,43833,91030,3738,761*) Net of 2,641,693 treasury shares of the Company, held by the Company.The accompanying notes are an integral part of the consolidated financial statements.F3CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSIn thousands, except number of shares dataConveniencetranslation Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development expenses, net5,8938,25611,5033,318General and administrative expenses4,2047,96812,9303,729Other Income(280)Total operating expenses10,09715,94424,4337,047Operating loss10,09715,94424,4337,047Financial income(4)(660)(101)(29)Financial expenses79333,8921,123Total Comprehensive loss10,17215,31728,2248,141Loss per shareBasic and diluted loss per share0.1370.1680.2520.073Basic and diluted loss per ADS2.743.365.041.46Weighted average number of shares outstanding used to compute basic and dilutedloss per share74,475,10991,128,516111,968,663111,968,663The accompanying notes are an integral part of the consolidated financial statements.F4CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN EQUITYIn thousands, except number of shares dataShare capitalAdditional paidin capitalTreasurysharesShare basedpaymentsAccumulateddeficitTotalequityN I SBalance as of January 1, 201530,904(9,425)1,710(10,230)12,959Issuance of share capital net of issue costs(see Note 11a1)5,5966966,292Sharebased payment1,3181,318Exercise of share options225(121)104Total comprehensive loss(10,172)(10,172)Balance as of December 31, 201536,725(9,425)3,603(20,402)10,501Issuance of share capital net of issue costs(see Note 11a4)30,6821,06231,744Sharebased payment1,5521,552Exercise of share options77Total comprehensive loss(15,317)(15,317)Balance as of December 31, 201667,414(9,425)6,217(35,719)28,487Issuance of ADS net of issue costs (see Note11a7)11,6938011,773Sharebased payment6424,7425,384Exercise of share options and warrants2,470(1,038)1,432Expiration of share options620(620)Total comprehensive loss(28,224)(28,224)Balance as of December 31, 201782,839(9,425)9,381(63,943)18,852Balance as of December 31, 2017 convenience translation in U.S. dollars (seeNote 2d)23,894(2,718)2,706(18,444)5,438The accompanying notes are an integral part of the consolidated financial statements.F5CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Operating Activities:Total Comprehensive Loss(10,172)(15,317)(28,224)(8,141)Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to profit and loss items:Net financing expenses69134532154Loss (Gain) from revaluation of financial assets presented at fair value through profitand loss(2)(106)13940Depreciation and capital loss from sale of property, plant and equipment71350372107Sharebased payment1,3181,5525,3841,553Changes in fair value of Traded and Non Traded Warrants To ADS(1,235)3,0038661,4566959,4302,720Changes in asset and liability items:Decrease (increase) in other receivables(328)(1,049)470136Increase in other payables1,3331,2594071171,005210877253Cash paid and received during the year for:Interest received114742Net cash used in operating activities(7,710)(14,412)(17,770)(5,126)Cash Flows from Investing Activities:Proceeds received from the sale of fixed assets7795Short term deposits, net(19,530)19,5305,633Restricted deposit(120)(165)(47)Marketable securities measured at fair value through profit and loss, net3,4302,808(9,008)(2,599)Purchase of property, plant and equipment(332)(1,265)(266)(77)Net cash provided by (used in) investing activities3,175(18,012)10,0912,910The accompanying notes are an integral part of the consolidated financial statements.F6CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except number of shares dataConveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsCash Flows from Financing Activities:Exercise of warrants and stock options into shares10471,432414Issuance of share capital and warrants, net of issue costs (see note 11)6,29234,91714,3814,148Net cash provided by financing activities6,39634,92415,8134,562Exchange differences on balances of cash and cash equivalents(70)(134)(679)(196)Increase in cash and cash equivalents1,7912,3667,4552,150Balance of cash and cash equivalents at the beginning of the year2,1223,9136,2791,811Balance of cash and cash equivalents at the end of the year3,9136,27913,7343,961(a) Noncash activities: Purchase of property, plant and equipment692587722 Issuance costs12737The accompanying notes are an integral part of the financial statements.F7CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 1: GENERALa.Cellect Biotechnology Ltd. (formerly Cellect Biomed Ltd.) (the "Company" or "Cellect") is incorporated in Israel. Cellect and its subsidiary, CellectBiotherapeutics Ltd. (the "Subsidiary") are engaged in the development of an innovative, unique technology that enables the biological filtering andcommercialization of stem cells. Cellect’s American Depository Shares (“ADSs”) and certain warrants to purchase ADSs are listed for trading on theNASDAQ Capital Market. Each ADS represents 20 ordinary shares.On May 29, 2017, the Company announced that it received approval of the Israeli court to voluntarily delist the Company's ordinary shares from theTelAviv Stock Exchange (TASE) in accordance with Section 350 to the Israeli Companies Law. The court approval followed the approval of theCompany's shareholders on May 9, 2017. On June 7, 2017, the TASE announced that the last trading day in Tel Aviv will be on September 3, 2017, andthat the delisting date will be on September 5, 2017. As a result, on September 5, 2017, the Company's ordinary shares were voluntarily delisted fromTASE. The ordinary shares of the Company continue to be listed on the NASDAQ Capital Market in the form of ADSs.b.Going ConcernThe accompanying financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS), assuming that theCompany will continue to operate as a going concern. During the year ended December 31, 2017, the Company incurred a net loss of NIS 28,224($8,141) and had negative cash flows from operating activities of NIS 17,770 ($5,126). In addition, the Company had an accumulated deficit of NIS63,943 ($18,444) at December 31, 2017. The Company's management plans to seek additional equity financing. The Company believes its currentcapital resources are sufficient to support its operations through the end of the first quarter of 2019.The Company’s activities since inception have consisted of raising capital and performing research and development activities. As of December 31,2017, principal commercial operations have not commenced. Successful completion of the Company’s development programs and, ultimately, theattainment of profitable operations, if any, are dependent on future events, including, among other things, its ability to obtain marketing approval fromregulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel anddevelop strategic alliances. Although management believes that the Company will be able to successfully fund its operations, there can be noassurance that the Company will be able to do so or that the Company will ever operate profitably.The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its businessplan, the Company will need, among other things, to complete its research and development efforts and clinical and regulatory activities. Theseactivities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurancethat these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate preclinical studies,clinical trials or other research and development activities. To fund its capital needs, the Company plans to raise funds through equity or debtfinancings or other sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the proceeds fromsales. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. These matters raisesubstantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to thecarrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern. In addition,please refer to note 16.c.The Company currently relies on a single source supplierfor one of the components used in R&D process. If the current supplier suffers a majornatural or manmade disaster at its manufacturing facility, or if they otherwise cease to supply to the Company, then this could result in further delaysin the clinical studies and may delay product testing and potential regulatory approval until a qualified alternative supplier is identified.F8CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwisestated.a.Basis of presentation of the financial statements:These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB").The Company's financial statements have been prepared on a cost basis, except for marketable securities and liability related to warrants that aremeasured at fair value through profit or loss. The Company has elected to present profit or loss items using the "function of expense" method. TheCompany's operating cycle is one year.b.Consolidated financial statements:The consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control exists whenthe Company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The consolidation of the financialstatements commences on the date on which control is obtained and ends when such control ceases.The financial statements of the Company and its subsidiaries (the "Group") are prepared as of the same dates and periods. The consolidated financialstatements are prepared using uniform accounting policies by all companies in the Group. Significant intercompany balances and transactions andgains or losses resulting from intragroup transactions are eliminated in full in the consolidated financial statements.c.Functional currency, reporting currency and foreign currency:1.Functional currency and reporting currency:The reporting and the functional currency of the Company is the New Israeli Shekel (“NIS”).The Company determines the functional currency of each company in the Group. The functional currency is used to measure the financialcondition and results of operations of each company separately.2.Transactions, assets and liabilities in foreign currency:Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate at the date of the transaction. Afterinitial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functionalcurrency at the exchange rate at that date. Exchange rate differences are recognized in profit or loss.d.Convenience translation into U.S. dollars:The financial statements as of December 31, 2017 and for the year then ended have been translated into U.S. dollars using the exchange rate of theU.S. dollar as of December 31, 2017 (U.S. $1.00 = NIS 3.467). The translation was made solely for convenience purposes.F9CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollarsor convertible into dollars, unless otherwise indicated.e.Cash equivalents:Cash equivalents are considered as highly liquid investments, including unrestricted shortterm bank deposits with an original maturity of threemonths or less from the date of acquisition.f.Restricted cash:Restricted cash is primarily invested to secure credit card payments and is used as security for the Company's lease commitment.g.Taxes on income:Tax results with respect to current or deferred taxes are recognized in profit or loss, unless they relate to items recognized in other comprehensiveincome or equity.1.Current taxesThe liability for current taxes is determined using the tax rates and tax laws that were enacted, or essentially enacted, by the reporting date, as well asadjustments required in connection with the taxes payable in respect of prior years.2.Deferred taxesDeferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributedfor tax purposes. Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that havebeen enacted or substantively enacted by the reporting date. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductiblecarryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and arespective deferred tax asset is recognized to the extent that their utilization is probable. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as longas the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event ofdistribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividendsdoes not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from a subsidiary that wouldtrigger an additional tax liability. Taxes on income that relate to distributions of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant toIAS 12. F10CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate tothe same taxpayer and the same taxation authority.h.Property, plant and equipment:Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation.Depreciation is calculated on a straightline basis over the useful life of the assets at annual rates as follows:%Computers and Electronic Equipment33Laboratory and clinical experiments equipment15Leasehold improvements(*Office furniture and equipment7 15(* Leasehold improvements are depreciated on a straightline basis over the earlier of the lease term or the estimated useful life of the improvement.The useful life, depreciation method and residual value of an asset are reviewed at least each yearend and any changes are accounted forprospectively as a change in accounting estimate.Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized. Anasset is derecognized upon disposal or when no further economic benefits are expected from its use.i.Research and development expenses, net of participations:Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from thedevelopment phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset sothat it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sellthe intangible asset; how the intangible asset will generate future economic benefits;The availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliablythe expenditure attributable to the intangible asset during its development.j.Government grants:Government grants received from the IsraelU.S. Binational Industrial Research and Development ("BIRD") Foundation are recognized upon receipt asa reduction in research and development expenses, as the Company evaluated that there is reasonable assurance that the Company will not berequired to pay royalties, based on the best estimate of future sales using the original effective method.F11CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)k.Impairment of nonfinancial assets:The Company evaluates the need to record an impairment of nonfinancial assets whenever events or changes in circumstances indicate that thecarrying amount is not recoverable.If the carrying amount of nonfinancial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using apretax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows isdetermined for the cashgenerating unit to which the asset belongs. Impairment losses are recognized in profit or loss.An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower ofthe carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset inprior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.m.Financial assets:Financial assets within the scope of International Accounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurement" ("IAS 39")are initially recognized at fair value plus directly attributable transaction costs, except for financial assets measured at fair value through profit or lossin respect of which transaction costs are recorded in profit or loss.After initial recognition, the accounting treatment of financial assets is based on their classification as follows:Financial assets at fair value through profit or lossThis category includes financial assets designated upon initial recognition at fair value through profit or loss.Loans and receivablesLoans and receivables are investments with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans aremeasured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less anyimpairment losses. Shortterm borrowings are measured based on their terms, normally at face value.Financial liabilities:Financial liabilities within the scope of IAS 39 are initially measured at fair value. After initial recognition, other liabilities are measured according totheir terms at amortized cost using the effective interest method, taking into account directly attributable transaction costs. The warrants wereclassified as a financial liability at fair value measured by quoted price and are marked to market through profit or loss in accordance with IAS 39.F12CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)Issue of a unit of securities:The issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based onthe following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined forfinancial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issuecosts are allocated to each component pro rata to the amounts determined for each component in the unit.n.Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in theabsence of a principal market, in the most advantageous market.The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,assuming that market participants act in their economic best interest.Fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in itshighest and best use or by selling it to another market participant that would use the asset in its highest and best use.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based onthe lowest level input that is significant to the entire fair value measurement:Level 1quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2inputs other than quoted prices included within Level 1 that are observable directly or indirectly.Level 3inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observablemarket data).F13CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)o.Treasury sharesThe Company's shares held by the Company are measured at their acquisition cost and are presented as an offset against the Company's equity. Anygain or loss deriving from the purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity.p.Employee benefit liabilities:The Group has several employee benefit plans:1.Shortterm employment benefits:Shortterm employee benefits are expected to be settled in full less than 12 months after the end of the annual reporting period in which theemployees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions and are recognized as expenses as theservices are rendered. The liability for a cash bonus or profitparticipating plan is recognized when the Company has a legal or constructiveobligation to pay the said amount in respect of past services rendered by the employee and the amount may be reliably estimated.2.Postemployment benefits:Post employment benefit plans are normally funded by contributions to insurance companies and are classified as defined contribution plans.The Company has defined contribution plans pursuant to Section 14 of the Israeli Severance Pay Law, into which the Company pays fixedcontributions and has no legal or constructive obligation to pay further contributions on account of severance pay, even if the fund does nothold sufficient amounts to pay all employee benefits relating to employee service in current and prior periods.Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributedconcurrently with performance of the employee's services.q.Sharebased payment transactions:From time to time the Company grants to its employees and other service providers remuneration in the form of equitysettled sharebasedinstruments, such as options to purchase ordinary shares.Equitysettled transactions:The cost of equitysettled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value isdetermined using an acceptable option pricing model.As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equityinstruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they aremeasured by reference to the fair value of the equity instruments granted.F14CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)The cost of equitysettled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which theperformance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award (the"Vesting Period").No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which aretreated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) aresatisfied.When the Company changes the conditions of the award of equitysettled instruments, an additional expense is recognized beyond the originalexpense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provideraccording to the fair value on date of change.Cancellation of the award of equitysettled instruments is accounted for as having vested at the cancellation date and the expense not yet recognizedin respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant atthe date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.r.Loss per share:Loss per share is calculated by dividing the net loss attributable to Company shareholders by the weighted number of outstanding ordinary sharesduring the period. Potential ordinary shares are only included in the computation of diluted loss per share when their conversion increases loss pershare or decreases income per share. Potential ordinary shares that are converted during the period are included in diluted loss per share only untilthe conversion date and from that date in basic loss per share.NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN PREPARATION OF THE FINANCIAL STATEMENTSEstimates and assumptions:The preparation of the Group's financial statements requires management to make estimates and assumptions that have an effect on application of theaccounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of thechange in estimate.The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Companythat may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.●Determining the fair value of sharebased transactionsThe fair value of share based transactions is determined upon initial recognition using acceptable option pricing models. The model is based onpershare price data and the exercise price and assumptions regarding expected volatility, expected life, expected dividend and riskfree interestrate.F15CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTIONa.IFRS 15, "Revenue from Contracts with Customers":IFRS 15 was issued by the IASB in May 2014.IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for theConstruction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC31, "Revenue Barter Transactions Involving AdvertisingServices".IFRS 15 introduces a fivestep model that will apply to revenue earned from contracts with customers:Step 1: Identify the contract with a customer, including reference to contract combination and accounting for contract modifications.Step 2: Identify the separate performance obligations in the contractStep 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, noncash consideration and any consideration payable to the customer.Step 4: Allocate the transaction price to the separate performance obligations on a relative standalone selling price basis using observableinformation, if it is available, or using estimates and assessments.Step 5: Recognize revenue when a performance obligation is satisfied, either at a point in time or over time.b.IFRS 9, "Financial Instruments":In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "FinancialInstruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to allassets in the scope of IAS 39.According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured atamortized cost only if both of the following conditions are met:The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.IFRS 9 also includes a new model for measurement of impairment of financial assets.F16CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debtinstruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensiveincome.Financial assets that are equity instruments should be measured in subsequent periods at fair value and the changes recognized in profit or loss or inother comprehensive income (loss), in accordance with the election by the Company on an instrumentbyinstrument basis. If equity instruments areheld for trading, they should be measured at fair value through profit or loss.According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has notbeen elected.According to IFRS 9, changes in the fair value of financial liabilities which are attributable to the change in credit risk should be presented in othercomprehensive income. All other changes in fair value should be presented in profit or loss.IFRS 9 also prescribes new hedge accounting requirements.The Company will adopt the new standard effective January 1, 2018. The Company does not expect the adoption IFRS 9 to have material impact on itsfinancial statements.c.IFRS 16, "Leases":In January 2016, the IASB issued IFRS 16, "Leases". According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use anasset for a period of time in exchange for consideration.According to IFRS 16:●Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except incertain cases) similar to the accounting treatment of finance leases according to the existing IAS 17, "Leases".●Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding rightofuse asset.Lessees will also recognize interest and depreciation expenses separately.●Variable lease payments that are not dependent on changes in the Consumer Price Index ("CPI") or interest rates, but are based on performanceor use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors asearned.●In the event of change in variable lease payments that are CPIlinked, lessees are required to remeasure the lease liability and the effect of theremeasurement is an adjustment to the carrying amount of the rightofuse asset.F17CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 4: DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR ADOPTION (Cont.)●IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatmentfor operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.●The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.For leases existing at the date of transition, IFRS 16 permits lessees to use either a full retrospective approach, or a modified retrospective approach,with certain transition relief whereby restatement of comparative data is not required.The Company is currently evaluating the impact of implementing this guidance on its consolidated financial statements. In 2018, the Company willcontinue to assess the potential effect of IFRS 16 on its consolidated financial statements as well as its adoption methodology.NOTE 5: MERGER WITH CELLECT BIOTHERAPEUTICS LTD. (formerly "Cellect Biotechnology Ltd")The merger between the Company and the Subsidiary, a private company engaged in development of innovative, unique technology, enablingselection of biologically filtered stem cells and commercialization, closed on July 1, 2013. Under the terms of the agreement, 44,887,373 ordinary shares,NIS 1.00 par value each, of the Company, constituting 85% of its equity, were issued to shareholders of the Subsidiary, as well as an aggregate of568,395 options (not listed for trading), each exercisable for one ordinary share of the Company, NIS 1.00 par value each, in consideration for the entireshare capital of the Subsidiary including all of the existing options in the Subsidiary, such that following the merger, the Subsidiary became a whollyowned subsidiary of the Company.Out of the options granted, an amount of 113,698 Series 1 unlisted options are exercisable until April 30, 2018, at an exercise price of NIS 1.00 peroption.NOTE 6: MARKETABLE SECURITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSSMarketable securities are measured at fair value through profit and loss. As of December 31, 2017 and 2016, the marketable securities are comprised ofNIS mutual funds that follow changes in short term Bank of Israel interest.F18CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 7: OTHER RECEIVABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsOther receivables516017Government authorities61118554Prepaid expenses7995731651,461818236NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NETBalance as of December 31, 2017:LaboratoryequipmentLeaseholdimprovementsOffice furnitureand equipmentComputersTotalCostBalance as of January 1, 20171,0063721472321,757Additions during the year244122465345Deductions during the year(2)(2)Balance as of December 31, 20171,2503841712952,100Accumulated DepreciationBalance as of January 1, 201714011618110384Additions during the year:1621251372372Balance as of December 31, 201730224131182756Depreciated cost as of December 31, 20179481431401131,344Depreciated cost as of December 31, 2017 (conveniencetranslation into U.S. dollars (Note 2d))274414033388F19CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET (Cont.)Balance as of December 31, 2016:LaboratoryequipmentLeaseholdimprovementsVehiclesOfficefurniture andequipmentComputersTotalCostBalance as of January 1, 2016687244176361491,292Additions during the year:31912811183641Deductions during the year:(176)(176)Balance as of December 31, 20161,0063721472321,757Accumulated DepreciationBalance as of January 1, 20161237848105Additions during the year:128116251062341Deductions during the year:(62)(62)Balance as of December 31, 201614011618110384Depreciated cost as of December 31, 20168662561291221,373NOTE 9: TRADE PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsService providers1,3431,703491Notes payable581,4011,703491F20CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 10: OTHER PAYABLESConveniencetranslation(Note 2d)December 31,December 31,201620172017N I SU.S. dollarsEmployees and payroll accruals *)1,6771,954564Accrued expenses393430124Other141232,0842,396691*)Balance includes related parties (The Company's CEO and the Chairman of the Board of Directors).NOTE 11: EQUITYa.Changes in share capital:Number ofShares (issued andoutstanding)Balance as of January 1, 2016*) 75,994,888Issuance of shares in private placement5,783,437Exercise of share options4,000Issuance of shares in an IPO25,846,160Balance as of December 31, 2016*) 107,628,485Issuance of shares in baby shelf offering10,622,720Exercise of share options1,484,154ADS granted (see Note 12c)450,300Balance as of December 31, 2017*) 120,185,659*)Net of 2,641,693 treasury shares of the Company, held by the Company.1.On April 20, 2015, the Company published an offering under the shelf registration statement and prospectus dated November 25, 2014,pursuant to which the public was offered up to 4,500,000 shares and up to 4,500,000 options (Series 1), exercisable into 4,500,000 ordinaryshares of the Company. The Company exercised its right for an overallotment not to exceed 15% of the total securities offered through theoffering, such that in total, the Company issued 4,523,500 ordinary shares and 4,523,500 options (Series 1) of the Company. The total grossproceeds received by the Company in respect of the securities offered to the public according to the shelf offering totaled NIS 6,604 (proceedsnet of issuance costs amounted to NIS 6,292).F21CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.During June 2015, 341,073 unlisted options were exercised for 341,073 shares of the Company, in consideration for a total of NIS 104.3.In February 2016, the Company completed a private placement of shares and warrants for a total of approximately NIS 8,000 and issued5,783,437 ordinary shares as well as 1,927,801 unlisted warrants exercisable for a period of 12 months, at an exercise price of NIS 2.1 per warrant.Participants in the private placement also included related parties and an officer of the Company. On May 16, 2016 the Company’sshareholders, at a general meeting approved the participation of the controlling shareholder and Chairman of the Board, Nuriel Kasbian Chirich,in the private placement, and accordingly he was allotted 287,769 shares and 95,923 unlisted warrants of the Company on the same terms as therest of the offerees. On January 9, 2017, the Company’s shareholders, at general meeting of the Company's shareholders approved theextension of the exercise period of the warrants until March 7, 2018.4.On July 28, 2016 the Company completed a US initial public offering (the “IPO”) of 1,292,308 ADSs and listed warrants to purchase 969,231ADSs (the “Listed Warrants”) at a combined price to the public of $6.50 resulting ingross proceeds of NIS 32,107, (NIS 25,820 net of allissuance costs, including sharebased awards granted). An amount of NIS 23,269 out of the consideration was related to the ADS andclassified as equity component, while an amount of NIS 3,173 was related to the fair value of the Listed Warrants to ADS and was classified asa liability. Issuance costs amounting to NIS 622 associated with the issuance of the Listed Warrants and have been recognized as financeexpenses.Each Listed Warrants is exercisable into one ADS, for a period of five years at an exercise price of US$ 7.50 per warrant. Since the warrantexercise price is in US dollars, which is not the Company's functional currency, the Listed Warrants were classified as a financial liability at fairvalue and are marked to market through profit or loss in accordance with IAS 39.The Company granted the underwriters a 45day overallotment to purchase up to 193,846 additional ADSs at a price of US$ 6.038 per ADSand/or an additional Listed Warrants to purchase 145,385 ADSs, on the same terms as the warrants issued to the public, at a price of US$ 0.007per warrant. The underwriters partially exercised the overallotment option resulting in the issuance of 65,890 Listed Warrants. The option tothe Underwriters was recognized as a share based payment transaction in accordance with IFRS 2, and was netted off the total considerationas issuance cost.Furthermore, the Company issued to the underwriters unlisted warrants to purchase 77,538 ADSs at an exercise price of $8.80 per warrantconvertible at a 1:1 ratio and exercisable for a period of four years. The underwriters' unlisted warrants were classified as a share basedpayment transaction in accordance with IFRS 2 and netted off the total consideration as issuance cost. On April 4, 2017, underwriters’ warrantsto purchase 61,487 ADSs were exercised.F22CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)5.On May 9, 2017, the Company's shareholders, at a general shareholders' meeting approved the following changes in the terms of the options(Series 1): (i) extension of the expiration date options (Series 1) to a date that is 80 days from court approval for suchof the exercise period ofthe options (Series 1) (i.e. August 17, 2017, following court approval), and (ii) reduction in the exercise price of the options (Series 1) from NIS1.85 per option to NIS 1.20 per option, in accordance with Section 350 of the Israeli Companies Law. On May 29, 2017, the court approved thechanges to the options (Series 1). On August 17, 2017 the options (Series 1) expired.6.Between July 1, 2017, and August 16, 2017, an aggregate of 516,574 options (Series 1) were exercised. Each option (Series 1) was exercised intoone ordinary share at an exercise price of NIS 1.20 per option.7.On September 7, 2017, the Company sold to certain accredited investors an aggregate of 531,136 ADSs and 265,568 unregistered warrants topurchase 265,568 ADSs in a registered direct offering at $8.10 per ADS in which it raised gross proceeds of NIS 15,214, (NIS 13,970 net of allissuance costs, including sharebased awards granted). An amount of NIS 11,695 out of the consideration related to the ADSs and classifiedas equity component, while an amount of NIS 2,481 related to the fair value of the warrants to purchase ADSs and was classified as a liability.Issuance costs amounting to NIS 204 associated with the issuance of the warrants, have been recognized as finance expenses. The investorwarrants may be exercised for one year from issuance and have an exercise price of $12.07 per ADS, subject to adjustment as set forth therein.The investor warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying thewarrants. The Company paid approximately $140 in placement agent fees and expenses and issued unregistered placement agent warrants topurchase 7,492 ADSs on the same general terms as the investor warrants except they have an exercise price of $10.125 per ADS.Since the warrant exercise price is in US dollars, which is not the Company's functional currency, the unregistered warrants to purchase ADSwere classified as a financial liability at fair value and are marked to market through profit or loss in accordance with IAS 39.The placement agent warrants were classified as a share based payment transaction in accordance with IFRS 2 and netted off the totalconsideration as issuance cost.b.Rights related to ordinary sharesAll ordinary shares shall have equal rights and each ordinary share shall entitle the holder the following rights:1.The right to receive notices of any general meeting of shareholders, to participate in meetings and vote on any matter raised in the meeting.Each ordinary share entitles its holder to one vote.F23CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 11: EQUITY (Cont.)2.The right to participate in any distribution by the Company to its shareholders and receive dividends and / or bonus shares, if distributed inaccordance with the Company articles of association.3.The right to participate at the time of liquidation of the Company, in the distribution of the Company's assets permitted to be distributed inproportion to the number of shares allocated and the degree of repayment by the shareholders, if not fully paid, and subject to the provisionsof the articles of association of the Company and without prejudice to existing rights of shareholders of any kind.NOTE 12: SHAREBASED COMPENSATIONa.In February 2014, the Company's board of directors adopted an Employee Shares Incentive Plan (the "2014 Plan"). Under the 2014 Plan, options maybe granted to employees, officers, directors, consultants, advisers and service providers of the Company.On February 28, 2017, the board of directors approved an increase to the Company’s option pool of 4,207,971 options. As a result, the Company has atotal of 12,707,971 options in the pool.b.On November 23, 2015, the Company's shareholders, at a general meeting of shareholders approved the former Deputy CEO and CFO terms of service,including a grant of options, which is an exception from the Company's compensation policy, as further described below. The terms of serviceincluded among others, a grant of 2,658,246 options, exercisable for 2,658,246 ordinary shares, no par value, of the Company at an exercise price of NIS1.286 per share. The total benefit in respect of the grant calculated at the grant date was NIS 3,033.On March 28, 2017, 500,000 options were exercised into 500,000 ordinary shares by the Company’s former Deputy CEO and CFO.During January, 2018, 310,180 options were exercised into 310,180 ordinary shares by the Company’s former Deputy CEO and CFO. The remaining297,420 options expired on February 28, 2018.c.Details on sharebased payment for service providers:1.On February 28, 2017, the board of directors approved the issuance to a consultant of 15,000 ADSs. The issuance was made in three equaltranches, of 5,000 ADSs each. The first tranche was issued in May 2017, the second tranche was issued in July 2017 and the third tranche wasissued in November 2017.2.On July 23, 2017, the Company issued 7,515 ADSs to a consultant. On June 28, 2017, the board of directors approved the issuance of ADSs.F24CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)d.Expense recognized in the financial statements:The expense that was recognized for services received from employees, directors and service providers is as follows:Conveniencetranslation(Note 2d)Year endedDecember 31,Year endedDecember 31,2015201620172017N I SU.S. dollarsResearch and development5232531,940560General and administrative7951,2993,444993Total sharebased compensation1,3181,5525,3841,553e.Activity during the year:The table below includes the number of share options, and the weighted average of their exercise prices:20162017Number ofoptionsWeightedAverageExercisepriceNumber ofoptionsWeightedAverageExercisepriceNISNISOutstanding at beginning of year5,764,8661.375,979,9731.25Options exercised for shares(696,980)1.16Options forfeited(2,054,396)1.43(166,667)0.63Option Expired(337,000)1.42(726,512)1.69Granted2,606,5031.146,362,8541.16Outstanding at end of year5,979,9731.2510,752,6681.18F25CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 12: SHAREBASED COMPENSATION (Cont.)f.The following table summarizes information about the Company's outstanding and exercisable options granted to employees and consultants as ofDecember 31, 2017:Exercise price(Range)Optionsoutstandingas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)Optionsexercisableas ofDecember 31,2017Weightedaverageremainingcontractualterm (years)0.001 1.358,310,1688.31,452,7824.31.35 1.82,010,5007.71,335,0006.71.8 2.1432,0007.6432,0007.610,752,6688.23,219,7825.8g.Measuring the fair value of share options settled by equity instruments:The Company shares data which is useful for measuring the fair value of the options under the BlackScholes model, for the years ended December31, 2016 and 2017, is as follows:20162017Dividend yield (%)00Expected volatility of the share prices (%)84.05%91.6%81.56%85.61%Riskfree interest rate (%)1.04%2.10%1.94%2.52%Expected life of share options (years)41010According to the data above, the fair value of options granted in the years 20162017 was set to NIS 10, 252 at the grant date.h.The determination of the grant date fair value of options using an option pricing model (the Company utilizes the BlackScholes model) is affected byestimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of the Company'sshare price over the expected term of the options, share option exercise and cancellation behaviors, riskfree interest rates and expected dividends,which are estimated as follows:1.The expected share price volatility is based on the historical volatility in the trading price of the Company's ordinary shares as well ascomparable companies on the TASE and on the NASDAQ and benchmarks of related companies.2.The expected term of options granted is based upon the contractual life of the options and represents the period of time that options grantedare expected to be outstanding.3.The riskfree interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.4.The Company has never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.Consequently, the Company uses an expected dividend yield of zero. NOTE 13: TAXES ON INCOMEa.Corporate tax rates in Israel:The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction of Corporate Tax Rate), 2016 was approved, which includes areduction of the corporate tax rate from 26.5% to 25%, effective from January 1, 2016.In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23%effective from January 1, 2018.b.Final tax assessments:The Company and its subsidiary received final tax assessments through tax years 2012.F26CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 13: TAXES ON INCOME (Cont.)c.Net operating carry forwards losses for tax purposes and other temporary differences:As of December 31, 2017, the Company had carry forward operating losses amounting to approximately NIS 35,085.The Company did not recognize deferred tax assets for carry forward operating and capital losses and other temporary differences because theirutilization in the foreseeable future is not probable.NOTE 14: CONTINGENT LIABILITIES AND COMMITMENTSa.Commitments1.On September 1, 2015, the Company signed a new lease agreement for new offices. The aforementioned lease agreement is for a minimumperiod of 3 years from the date of signing the agreement. Under this agreement, the Company will pay a monthly rental fee plus anadministration fee of NIS 34.The Company has entered into operating lease agreements for vehicles. These leases have an average life of three years with no option toextend the contract. The Company has the right to terminate the agreement before the end of the three years and will be required to pay anearly termination penalty of between one to three months of the lease. The future lease payments as of December 31, 2017 are approximatelyNIS 183.2.The Company participated in programs sponsored by the IsraelUnited States Binational Industrial Research and Development Foundation(BIRD) for the support of research and development activities. The Company is obligated to pay royalties to BIRD, amounting to 5% of thegross sales of the products and other related revenues developed from such activities, up to an amount of 150% from the grant received fromBIRD by the Company indexed to the U.S. consumer price index.As of December 31, 2017, the Company received an aggregate grant of $120 from the BIRD Foundation in support of the development andcommercialization of the Company's stem cell selection technology in collaboration with Entegris. Subject to the successful completion ofdifferent milestones, the Company expects to receive additional grants in the future.b.Liens:The Company provided a NIS 185 restricted bank deposit to secure credit card payments.The Company provided a NIS 120 restricted bank deposit to secure the rent payment.NOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIESa.Related party balancesConvenience translation(Note 2d)December 31Year endedDecember 31,201620172017KeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesKeymanagementpersonnelOther relatedpartiesNISU.S. DollarsOther payables318805425827123238318805425827123238F27CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)b.The directors and senior managers of the Company are entitled, in addition to salary, to noncash benefits (such as a car, medical insurance, etc.).Benefits for employment of key management personnel (including directors) employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsShortterm employeebenefits (includesCompany's CEO in 2015,2016 and 2017)53,42376,04057,8162,254c.Benefits for employment of key management personnel (including directors) that are not employed in the Company:Conveniencetranslation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017No. ofpeopleAmountNISNo. ofpeopleAmountNISNo. ofpeopleAmountNISAmountU.S. dollarsKey managementpersonnel and relatedparties2444Directors' fees547755138682197792155138682197F28CELLECT BIOTECHNOLOGY LTD. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except number of shares dataNOTE 15: BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)d.Transactions with related parties:Convenience translation(Note 2d)Year ended December 31,Year endedDecember 31,2015201620172017KeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesKeymanagementpersonnelRelatedpartiesResearch anddevelopmentexpenses7131,4221,0631,5446342,661183767General andadministrativeexpenses9218112,3171,1162,0142,5075817241,6342,2333,3802,6602,6485,1687641,491NOTE 16: SUBSEQUENT EVENTSOn January 29, 2018, the Company sold to certain accredited investors an aggregate of 484,848 ADSs in a registered direct offering at $8.25 per ADSresulting in proceeds of approximately NIS 12,500 ($3,600) net of issuance costs. In addition, the Company issued to the investors unregisteredwarrants to purchase 266,667 ADSs in a private placement. The investor warrants may be exercised until February 7, 2019 and have an exercise price of$12.00 per ADS, subject to adjustment as set forth therein. The investor warrants may be exercised on a cashless basis if there is no effectiveregistration statement registering the ADSs underlying the warrants. The Company paid approximately $305 in placement agent fees and expensesand issued unregistered placement agent warrants to purchase 24,242 ADS on the same general terms as the investor warrants except they have anexercise price of $10.31 per ADS.F29EX12.1 2 f20f2017ex121_cellectbio.htm CERTIFICATIONExhibit 12.1CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Shai Yarkoni, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Shai YarkoniShai YarkoniChief Executive OfficerEX12.2 3 f20f2017ex122_cellectbio.htm CERTIFICATIONExhibit 12.2CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a14(a) or 15d14(a)I, Eyal Leibovitz, certify that:1.I have reviewed this Annual Report on Form 20F of Cellect Biotechnology Ltd. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a15(e) and 15d15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the Company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;(c)Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and5.The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company'sauditors and the audit committee of the company’s board of directors:(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control overfinancial reporting.Date: March 19, 2018/s/ Eyal LeibovitzEyal LeibovitzChief Financial OfficerEX13.1 4 f20f2017ex131_cellectbio.htm CERTIFICATIONExhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Shai YarkoniName: Shai YarkoniTitle: Chief Executive OfficerEX13.2 5 f20f2017ex132_cellectbio.htm CERTIFICATIONExhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. Section 1350In connection with the filing of the Annual Report on Form 20F for the period ended December 31, 2017 (the “Report”) by Cellect Biotechnology Ltd. (the"Company"), the undersigned, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe SarbanesOxley Act of 2002, that, to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 19, 2018/s/ Eyal LeibovitzName: Eyal LeibovitzTitle: Chief Financial OfficerEX15.1 6 f20f2017ex151_cellectbio.htm CONSENT OF KOST FORER GABBAY & KASIERER, CERTIFIED PUBLIC ACCOUNTANT (ISR.), A MEMBER OF ERNST& YOUNG ISRAELExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S8 (Registration No. 333214817 and 333220015) and Form F3 (333212432 and 333219614), of our report dated March 13, 2018, with respect to the consolidated financial statements of Cellect Biotechnology Ltd. (formerly: CellectBiomed Ltd.), which appear in this Annual Report on Form 20F for the year ended December 31, 2017./s/ Kost Forer Gabbay & Kasierer Tel Aviv, IsraelKOST FORER GABBAY & KASIERERMarch 19, 2018A member of Ernst & Young Global

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